Gemalto NV (GTO), the smart-card maker whose market value has almost doubled this year, will replace Alcatel-Lucent SA (ALU) in the CAC 40, putting an end to the unprofitable network-equipment vendor’s 25-year presence in France’s leading stock index.
The change, effective Dec. 24 according to an NYSE Euronext (NYX:US) statement, marks a milestone for Gemalto, whose next move will be to seek a secondary listing on the Amsterdam exchange in 2013 to increase the stock’s liquidity, Chief Executive Officer Olivier Piou said in an interview. A listing in the U.S. or Asia may be considered later, he said.
“Joining the CAC 40 means increased visibility and more financing opportunities if we ever need them,” Piou said. “It’s proof that you can do business in France, take risks, and get recognition for seeing your plans through.”
Alcatel-Lucent, the former industrial giant whose operations once ranged from spaceflight to cutting-edge theoretical physics, was part of the CAC 40 since the index’s creation in 1987. Declining demand for networking gear and Asian competition have caused mounting losses for the company created from the 2006 merger of Alcatel SA and Lucent Technologies.
Shares of Amsterdam-based Gemalto climbed 0.8 percent to 74.59 euros at 9:29 a.m. in Paris, the highest level since the company’s listing in May 2004.
Alcatel-Lucent, based in the French capital, fell 1.9 percent to 87 cents. Its market value has shrunk by about 70 percent since Ben Verwaayen, a 60-year-old former BT Group Plc (BT/A) executive, became CEO in September 2008. At 2 billion euros, the market capitalization is less than a third of Gemalto’s.
The rest of the benchmark will stay the same, NYSE Euronext said yesterday after the market close and following its quarterly review of the CAC 40’s members. Decisions on the index’s composition are based on data about free float, market value and volumes.
Exiting the CAC adds to Alcatel-Lucent’s list of recent setbacks. Moody’s Investors Service this month cut the company’s debt rating further into junk. Alcatel last month reported a second straight quarterly loss and said it was considering asset sales to bolster its finances.
Management changes, cost cuts and assets sales have so far failed to stem Alcatel’s consumption of billions of euros in cash, leaving CEO Verwaayen fighting to obtain financing from a group of banks led by Goldman Sachs Group Inc. (GS:US) amid a wide- ranging overhaul that will probably require deeper job cuts and major asset sales, people familiar with the matter have said.
“Alcatel-Lucent continues to be listed and traded on the Paris and New York stock exchanges, and this news does not impact that,” said Simon Poulter, a spokesman for the company. “We are aggressively driving the performance program to rescale Alcatel-Lucent, reduce our cost base by 1.25 billion euros by the end of 2013, and install sustainable profitability for the long term.”
Piou, who happens to be an Alcatel-Lucent board member, said the gear maker’s priorities today were its clients, its financial health and its employees.
“Board meetings don’t discuss indices,” Piou said. “That applies to Gemalto too. Joining the CAC 40 is a reward but it’s obvious you have to have the business plans to back it all up.”
Gemalto’s entry keeps the CAC’s share of technology stocks stable, with Cap Gemini SA (CAP), a computer-services company and International Business Machines Corp. (IBM:US) competitor, and Europe’s largest semiconductor maker STMicroelectronics NV (STM) making up the remainder.
Joining the CAC marks the latest milestone for Gemalto chief Piou, a 54-year-old engineer who has been running the company since the 2006 merger of Gemplus and Axalto and has returned Gemalto to profit.
Under Piou, Gemalto has shifted revenue from older commoditized smart chips to new security technology, in a bet that contactless mobile payment and so-called machine-to-machine transmissions will increase.
Piou is in the process of drafting a new strategy to be unveiled next year after he forecast Gemalto will reach its 2013 target ahead of plan.
Piou said today the company doesn’t need any financing to execute its plans, though the extra visibility from listings elsewhere in Europe, the U.S. or Asia may create partnership opportunities.
“It’s where our historical know-how and our research and development is,” Piou said. “It’s obvious we’re still keen on keeping our Paris-listing. France is home for us.”
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