Eurozone crisis hits Alcatel-Lucent's recovery
Revenue and full year forecasts fall short of market hopes, though third quarter shows robust return to profit
Published: 4 November, 2011
READ MORE: Financial | Europe | Alcatel-Lucent
Alcatel-Lucent hit a roadblock on its recent journey back to financial stability, and cut its profit forecast for the full year after missing market estimates in its third quarter.
The French infrastructure giant saw its stock value fall by as much as 11% after it said full year adjusted operating margin would be about 4%, a full percentage point less than earlier guidance. In Q3, sales were down 6.8% year-on-year to €3.8bn ($5.3bn), below consensus analyst forecasts of €4bn.
However, the net income figure of €194m blew away market expectations of around €57m, indicating the success of ALU's cost cutting programs and its shift towards higher margin businesses, which has included a series of divestments of non-core activities. The vendor returned to profit in the second quarter of 2011 with a €43m income.
CEO Ben Verwaayen has steered the firm back towards profitability this year after a turbulent period since ALU 's formation in 2006, but now his efforts are being hit by the economic crisis in the eurozone. He said on the earnings call that Europe was "a hesitant market, and the uncertainties are bigger than we anticipated before." For that reason, "we see fourth quarter revenue in Europe weaker than we planned."
In Q3, European revenue fell 12% year-on-year to €1.1bn and as well as the financial crisis, the market could be further depressed by major consolidations between suppliers, notably the joint procurement venture of Deutsche Telekom and France Telecom. Europe was not the worst market in Q3 though, with Asia slipping by 19%. ALU has not made the same impact on Asian 3G and 4G projects as it has in Europe and the US. Despite its flagship deals with the top three US carriers, it saw sales in its largest market, north America, slide by 0.3%.
The company said it planned to increase the targets for its ongoing cost cutting plan, chasing an additional €500m in 2012, even after the end of the three-year turnaround program which Verwaayen kicked off at the start of 2009.
More FINANCIAL News
More EUROPE News
More ALCATEL-LUCENT News
COMMENTS
Carrier Broadband Performance: Africa & Middle East
Carriers are using mobile broadband as their weapon of choice in the fight against the commoditization of voice and falling ARPU. This...
Voice over LTE: Market Analysis and Forecasts
VoLTE offer unique advantages in lowering a carrier's voice infrastructure economics and promises to improve voice quality, device...
Satellite Phones: Will Dual Mode Help the Phoenix Rise from the Ashes?
Satellite phones have followed an arduous path since their much-hyped launch more than a decade ago. The hype was followed by an e...
