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AlcaLu Posts Loss, Warns on Full Year

Ray Le Maistre
4/30/2008

Alcatel-Lucent (NYSE: ALU) issued another hammer-blow to its investors today as it posted an expected first quarter loss and, more tellingly, said its full year 2008 revenues are expected to be down "in the low to mid-single digit range" compared with 2007, when revenues totaled €17.79 billion ($25.8 billion).

In its official release this morning the company announced its "updated projections for 2008 now indicate that the global telecommunications equipment and related services market should be flat versus the company's previous forecast of flat to slightly up." (See AlcaLu Reports 1Q08.)

However, with about half of its revenues coming in U.S. dollars, or dollar-linked currencies, and with the exchange rate between the dollar and the euro having deteriorated in the past year, it means that, in euros, its total revenues are set to be lower year on year. The company also noted that "the potential for lower capital spending by a few customers" was also affecting its financial outlook.

The news sent the vendor's share price down by €0.30 ($0.47), about 6.7 percent, to €4.19 ($6.54) on the Paris exchange.

For the first quarter of 2008, the company reported a net loss of €181 million ($282.5 million). Even after one-time, non-cash items related to the merger of Alcatel and Lucent in late 2006, the vendor's adjusted net loss was €95 million ($148.27 million).

Revenues were €3.86 billion ($6.02 million), down slightly (0.5 percent) compared with the disappointing first quarter of 2007 that was hit hard by the fallout from the late 2006 merger. (See Merger Tears Into AlcaLu's Sales.)

The company says that dip is due mainly to the shift in exchange rates during the past 12 months: At a constant €/$ rate -- that is, if the first quarter 2008 exchange rate had been the same as the same quarter a year earlier -- AlcaLu's sales were up 6.3 percent.

There's good news, at least, on the vendor's gross margin –- at 36.2 percent it is better than a year earlier (34.4 percent) and shows a sequential improvement from the fourth quarter's 32.4 percent.

CEO Pat Russo noted in the vendor's earnings release that "considering the impact of the Euro/US$ adverse shift, our revenue performance was in line with our expectations."

And in an effort to find a silver lining on a dark cloud, the CEO noted that she believes the company is "taking the right actions to position the company to take advantage of the long-term growth potential we see in the industry driven by new subscribers, more broadband deployments and video and data traffic growth."

For the second quarter of 2008, AlcaLu expects revenues to increase in the mid single-digit range compared with the first quarter.

Worrying trends
But the quarter's performance, irrespective of exchange rates and the "uncertain macroeconomic environment," shows some disturbing trends for the vendor.

While its enterprise and services divisions reported growing sales, the Carrier group reported mixed fortunes. Its optical business performed well on the back of an upswing in new subsea network rollouts, and the IP division continues to do well, but ADSL port shipments were down 8 percent year on year, CDMA mobile infrastructure sales "declined materially," and the voice switching business "declined strongly," and was only partly offset by sales of VOIP gear.

— Ray Le Maistre, International News Editor, Light Reading

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optodoofus
optodoofus
12/5/2012 | 3:42:03 PM
re: AlcaLu Posts Loss, Warns on Full Year
I wonder what all the Lucent defenders will say now that Ericsson has turned the corner and Lucent is still wallowing. The problem is not the industry; the problem is Lucent. They are a train wreck.

My advice is that they should cut off the head and start anew. Pat must go.

optodoofus
cw.774
cw.774
12/5/2012 | 3:42:00 PM
re: AlcaLu Posts Loss, Warns on Full Year
she will....

vive Le France!
exon
exon
12/5/2012 | 3:41:57 PM
re: AlcaLu Posts Loss, Warns on Full Year
Pat is not merely the problem. the problem is deeply rooted in the operating culture (of both companies although i have experienced it mainly in the alcatel side) that allows, if not supports, middle-level and regional management to pursue its own interests and strategy frequently at the expense of ALU corporate goals. if this doesnt change then dont expect any real success....
tm1_queen
tm1_queen
12/5/2012 | 3:41:50 PM
re: AlcaLu Posts Loss, Warns on Full Year
2 years too late
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