Alcatel Pays Up

Alcatel (NYSE: ALA; Paris: CGEP:PA) gave telecom investors something to cheer about this morning by proposing its first dividend in four years after recording a 61 percent increase in net income for 2005. (See Alcatel Reports Q4, Full Year.)

Alcatel said its 2005 net income hit €930 million ($1.12 billion) from revenues of €13.14 billion ($15.85 billion), compared with €576 million ($694 million) from revenues of €12.24 billion ($14.76 billion) in 2004. In a prepared statement, CEO Serge Tchuruk said the company's carrier revenues grew 10 percent during 2005, with the wireline business recovering in the second half of the year "due to the success of our triple play strategy coupled with a breakthrough in our IP carrier data solutions." He also noted growth in wireless network equipment.

As a result, the CEO announced a planned dividend of €0.16 per share, its first payout since 2002, and the vendor's stock increased by €0.44, or 4 percent, to €11.65 this morning on the Paris exchange. The company will propose the payment at its annual shareholders' meeting on June 1.

The 2005 financials were helped by a particularly strong fourth quarter, when the firm generated €344 million ($415 million) in net income from revenues of €4.09 billion ($4.93 billion).

Alcatel said DSL port shipments reached an all time high of 6.7 million in the quarter, taking the 2005 total to 21.6 million, up 10 percent over 2004. It also noted that it now has more than 100 customers for its IP router products and has now shipped more than 5,000 units of its 7750 and 7450 products. The vendor is expected to announce a new IP router product during the current quarter. (See Sources: Alcatel Plans IP Growth.)

And Tchuruk expects a strong 2006 too, with first-quarter revenues expected to be up by more than 10 percent compared with the €2.6 billion ($3.13 billion) recorded a year ago. (See Alcatel Sales Grow, Profit Falls.) And while growth rates aren't due to be so high in the second half of the year, Alcatel reckons its 2006 revenues "should outpace the carrier market growth for the full year," which the company expects to be in the mid single digit range. In a prepared statement, Tchuruk noted that the "rate of growth going into the year will depend on the regulatory outcome for fiber deployments, 3G deployments in China, and the take-up rate of IP carrier network transformation."

Nomura Securities telecom analyst Richard Windsor said the quarterly and annual profits are "comfortably ahead of both our forecasts and those of the market," while the first-quarter revenue projection is also better than expected. Alcatel has "set itself up for a good 2006 by reporting strong results and giving solid guidance for the year ahead," he said in a reserach note this morning, giving Alcatel's stock a target price of €12.70.

— Ray Le Maistre, International News Editor, Light Reading

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