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ALU delights markets with first profit for nine quarters
Published: 30 July, 2009
Tags >> Financial | Alcatel-Lucent
Alcatel-Lucent gave the markets a pleasant surprise today when it announced its first profit since it was created in 2006, posting net income of €14m ($19.6m) for the second quarter, reversing a year-ago net loss of €1.1bn. The French giant also said it would acquire content delivery network (CDN) firm Velocix, extending its new push into carrier services and 'Telco 2.0', which now lie at the heart of its turnaround strategy.
The company benefited from gains on asset sales, in contrast to Q208, when its earnings were hit by a writedown on wireless technology holdings of almost €1bn. CEO Ben Verwaayen said in his statement that ALU was enjoying "positive trends" in sales, gross margins and operating expenses, and said the company will come close to operating break-even this year, even though he still expects the telecoms infrastructure market as a whole to shrink by 8%-12%.
The end to nine consecutive quarters of losses may have been mainly down to profits from selling non-core units (the satellite business and a 20.8% stake in defense contractor Thales) but it still delighted analysts, which had forecast a net loss of €191m on sales of €3.85bn. ALU still saw its operating loss widen to €130m on sales that slid by 4.8% to €3.91bn.
The telecoms equipment business saw a 10% year-on-year fall in sales and an operating loss of €136m. The wireless division's shortfall was less than the overall decline, at 5% year-on-year, with ALU blaming most of the wireless losses on a steep drop in GSM sales, especially in China, as operators move to 3G.
ALU is still going through radical restructuring to get back profit after making total losses of €9bn since its merger, a transaction that French industry minister Christian Estrosi called a "mistake) earlier this week. ALU says it will sell off further non-core units though Estrosi warned the company not to threaten French jobs by offshoring R&D activities or closing further French manufacturing facilities. Earlier this month the vendor said it would cut a further 850 jobs in its home country as part of an overall plan to save €750m this year, which will involve 16,500 job losses worldwide.
The company is making acquisitions too, to boost what it sees as its key growth area - supporting wireless and converged carriers in moving to a new breed of multimedia, quad play and web services. To this end, it has bought Velocix, which provides infrastructure and services for providers to deliver video, in particular, over wireline and, in future, wireless IP networks.
