CIEN) and Acme Packet ( APKT) are going to suddenly let off the gas pedal. Management has not addressed the reality that ALU's margins are likely to remain under pressure for the foreseeable future. Equally important and perhaps more so, ALU has decided to cut costs as soon as the long-awaited carrier spending recovery is finally emerging. Essentially, the company is likely to lose incremental market share when the likes of AT&T ( T) and Verizon ( VZ) are about to loosen their purse strings to invest capital back into their businesses. It's poor timing. CSCO) and Juniper ( JNPR). So there's cause for some optimism. So why, then, does it now seem appropriate for management to cut spending in areas like research and development? Given Alcatel-Lucent's strong patent portfolio, why not leverage these assets to produce competing products to fight off the likes of Ciena, which has begun to dominate ALU's core optical networking business?
In Wednesday's article, a reader took issue with my questioning management's decision to sell one billion euros worth of assets. The reader made an excellent point, however, asking, "What sense does it make to keep those businesses if they weren't profitable?" Truth be told, I could not argue with that kind of logic, especially if management was convinced that ALU could not compete in those markets. But I still don't believe there is a buyer out there willing to spend one billion euros for assets that ALU has been unable to translate into profits. NOK), which has served as the poster child for why I believe strict cost-cutting has its limitations. Even though ALU's spending cuts should help the company reduce its near-term cash break-even point -- which I sense is one of the main objectives here to the extent that it supports the sudden high expectations presumed by the share price -- I don't believe that it does. Spending cuts won't grow market share, that's just a fact. Or has that suddenly become unimportant? At the time of publication, the author held no position in any of the stocks mentioned. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.