ALU's loss worse than expected, but sticks to break-even schedule
Published: 6 May, 2009
READ MORE: Alcatel-Lucent | Financial
Alcatel-Lucent performed worse than expected in the first quarter, though it still says it is on track to break even on an operating basis this year. The relative bullishness of arch-rival Ericsson in its own results call had raised hopes for a nice surprise at ALU, but the French company reported a 6.9% year-on-year drop in revenues, to €3.6bn ($4.8bn) and a net loss that more than doubled on last year's, up from €181m to €402m ($539m). This was the company's ninth consecutive quarterly loss and far worse than the €271m predicted by analysts.
That reversed last year's pre-tax profit of €36m with a loss of €254m. CEO Ben Verwaayen, who is steering the company through a major restructuring, said the seasonal drop had been worse than expected but he would take firm action to stem the losses. He blamed double-digit spending reductions among carriers and enterprises - a different experience from that of Ericsson, which had seen only limited carrier cutbacks, at least in wireless. The downturn was only partly offset by gains at ALU in W-CDMA, IP systems and submarine cable, and an increase in one of ALU's main targeted growth areas, applications and services. A key element of the turnaround plan is to shift the balance of business towards software as ALU seeks to support carriers' shifts towards 'Telco 2.0'.
Reflecting continuing pressure on the CDMA business inherited from Lucent - with the notable exception of new business from China Telecom, which will boost Q2 - north American sales slumped by 28% year-on-year.
ALU expects the carrier equipment and services market to be down by 8%-12% overall in 2009, but Verwaayen promised about €750m in further cost cuts to achieve operational break-even this year.
"This quarter was about putting together the new Alcatel-Lucent," Verwaayen said in a statement. "I am pleased with the customer response to our new direction and strategy. As we discussed before, 2009 will be a year of transition."
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