Alca-Lu scrambles to stay profitable

Michael Carroll
30 Apr 2012

Alcatel-Lucent overturned a net loss in 1Q11 with a profit in the recent quarter, but the figure masks sharp falls in revenue year-on-year, and a widening operating loss.

The infrastructure firm netted €398 million ($527 million) in profit during 1Q12, which appears to stem mostly from the sale of its Genesys business for €1 million in early February. However, that sale couldn’t stave off the effect of a 12.3% year-on-year fall in revenue to €3.2 billion, nor prevent the firm’s operating loss growing from €64 million in 1Q11 to €289 million in 1Q12.

Chief executive, Ben Verwaayen, said the figures bear testament to the firm’s strict cash and cost controls during a slow start to the year, but conceded the gross margin of 30.3% in 1Q12 “is not at the level we would have liked.” The chief predicted better fortunes for the firm through the remainder of 2012, as it leverages “a number of significant next generation network rollouts,” in North America and China, which should offset “market uncertainties” in Europe.

Revenue at the firm’s core networking business fell 18.1% year-on-year, with the IP unit the only one within the networks division to grow sales over that timeframe. The enterprise business was the second biggest loser, with sales down 8.7% year-on-year, while sales by the firm’s software, services and solutions business were broadly stable, falling a marginal 0.6% over 1Q11.

Bernstein Research analyst Pierre Ferragu blamed weakness in the European economy for Alcatel-Lucent’s sluggish start to the year. However, the fall in revenues was in-line with analyst’s forecasts, Reuters reports.

The vendor generated its first full year profit since its formation during 2011, but pledged to maintain cost cutting schemes through 2012 to address tough market conditions.

Alcatel-Lucent reported its 1Q results a day after rival Ericsson revealed it more than doubled net profit year-on-year to 8.8 billion Swedish Krona (€989 million) during the quarter.

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