Supply chain problems drag Alcatel-Lucent down
Key businesses hit by shortages in Q1, but services and software also fall
Published: 6 May, 2010
READ MORE: Financial | Alcatel-Lucent
Alcatel-Lucent suffered another bad quarter, though it stuck by its existing full year forecasts. In its first quarter, revenues fell by 18% compared to the last period of 2009, mainly because of component shortages, while net losses widened.
ALU reported revenue of €3.247bn, 9.8% down year-on-year, and blamed short supply of wireless access and terrestrial optics components. This prevented the company from fulfilling some contracts, despite a slight uptick in demand for its equipment during the first three months of 2010.
But analysts pointed out that other areas, unaffected by the shortages, were suffering too, including the applications division, which ALU sees as one of its key differentiators and sources of growth. In that business, revenue was down 6.3% year-on-year to €416m, while another key growth business, services, saw a 3.1% fall to €772m.
All this helped create a net loss of €515m, larger than the year-ago deficit of €402m, and the stock plunged by 10% on the news.
Despite these poor figures, CEO Ben Verwaayen was determinedly upbeat. "We are witnessing a recovery in the telecommunications equipment and related services market in some geographical areas, especially north America," he said in his statement. He added that the weak quarter hid "underlying momentum", and refused to change his outlook for the full year, which predicts growth of zero to 5% in the telecoms industry as a whole, and an adjusted operating margin of between 1% and 5%.
Despite the supply chain problems, ALU said there was recovery in demand for some key technologies, notably W-CDMA (with LTE also becoming a factor), IP and terrestrial optics. "With a solid position in all of these areas, Alcatel-Lucent is experiencing a strong increase in demand," Verwaayen said.
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