ALU's turnaround continues with strong Q2
CEO Verwaayen appears to have achieved his goal of sustained profitability, Americas drive growth
Published: 28 July, 2011
READ MORE: Financial | Alcatel-Lucent
Alcatel-Lucent continues to increase confidence in its turnaround, reporting a better than expected second quarter, boosted by strong performance in the Americas.
It's been a long time coming, but sustainable profitability now looks possible at the French giant. It reversed last year's Q2 loss of €184m with a net income of €43m ($62m), well ahead of the €13m consensus analyst forecast. Sales were up 2.4% to €3.9bn.
CEO Ben Verwaayen had set a target of returning ALU to consistent profit by the end of this year, the culmination of a turnaround plan that he kicked off almost three years ago. Since its formation, the vendor has struggled with a painful merger, rising competition in key markets and slow results from some of its newer initiatives in areas like carrier web services. It has divested various non-core units and now plans to sell off the enterprise switching business, and has made several rounds of cost reductions.
In Q2, the strongest growth was seen in north America, where ALU is supplying LTE and other systems to the top three carriers; in Latin America, on the back of 3G data expansion; and in parts of Asia.
Verwaayen repeated its previous full year forecast and said it would grow more quickly than its "addressable market" with an adjusted operating margin above 5% of 2011 sales. The stock dropped 6.9%, with some investors hoping for an upgraded guidance.
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