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Alcatel-Lucent usually rounds off the wireless earnings season, and it managed to beat analysts’ estimates for the second quarter running, adding new confidence in its ongoing and often painful turnaround. CEO Ben Verwaayen, the architect of the process, said ALU was on its way to “becoming a normal company at the end of the year”.

The French giant was still in the red, but its Q1 loss narrowed as sales rose healthily, especially in north America, where ALU is a major supplier for LTE build-out at Verizon and AT&T, and for Sprint’s Network Vision program. Its revenues were up 40% year-on-year in the region, well ahead of an overall 15% increase to €3.74bn, which fell slightly below forecasts. However, the net loss had shrunk faster than analysts had predicted, down to just €10m from a huge €515m a year earlier (forecasts were for a €144m deficit). Adjusted operating profit was €13m, reversing last year’s €195m loss, and pleasing pundits, who had expected a loss again this year.

Outside north America, though, the picture was lackluster. China was growing strongly, but this only partly offset weakness in the rest of the Asia-Pacific region, which totalled just 1.7%. Meanwhile, European sales were down 1.8%.

Verwaayen said he is targeting an adjusted operating margin above 5% for the full year, and that it expects to outperform the overall telecoms equipment and services sector despite rising competition from the Chinese majors and the newly merged NSN/Motorola Networks. He believes the total market will see growth of about 5% this year, an improved forecast on previous predictions of between zero and 5%.

Verwaayen is coming to the end of his three-year plan to return ALU to sustainable profit after years of losses following a difficult merger. The well respected CEO has slashed costs, streamlined businesses, and surged ahead in growth markets like LTE and carrier web services. But he still has many challenges. While LTE is performing well, 3G remains the main revenue stream in wireless infrastructure and here ALU is weaker, having missed out almost entirely on the Indian build-out. And it has not expanded as strongly as Ericsson in the key market for managed services. Verwaayen has already divested some non-core business units such as vacuum technology and is likely to shed more, notably the enterprise telecoms operation, which could also be floated.

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