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AlcaLu Details Q1 Woes

Alcatel-Lucent (NYSE: ALU) confirmed its weak first-quarter performance today, reporting revenues of €3.88 billion (US$5.23 billion), down nearly 13 percent from the €4.43 billion ($6 billion) the recently formed vendor would have reported as a unified company a year earlier. (See Alcatel-Lucent Reports Q1.)

The company had warned of its early-year weakness in late April, when it highlighted particular weakness in sales of mobile infrastructure. (See Alcatel-Lucent Suffers Q1 Slump.)

AlcaLu's operating loss was €244 million ($329 million), a reversal from the €246 million ($332 million) operating profit from a year earlier. Its net income was €199 million ($268 million), but that included a one-time gain of €677 million ($913 million) from the sale of its space technology business to Thales SA (Paris: TCFP.PA). Without that, its net loss would have been €478 million ($644 million). (See AlcaLu Transfers Space Assets.)

Revenues from carrier infrastructure sales were down 15 percent from a year earlier to €2.84 billion ($3.83 billion), with sales of wireless gear down 20 percent year-on-year to €1.2 billion ($1.6 billion).

Revenues from the convergence division, which includes IPTV and IMS systems, fell by 30 percent to €348 million ($469 million).

Nomura Securities analyst Richard Windsor described it as "a disappointing set of results," while the team at Dresdner Kleinwort , in a research note issued this morning, pointed to what it calls "anti-synergies." The vendor's performance "demonstrates that the merger is significantly behind management plans," added the Dresdner team.

Windsor also sees post-merger difficulties. "The company is mired is deep restructuring and at the same time it is haemorrhaging market share to Ericsson AB (Nasdaq: ERIC)." (See Ericsson Delivers in Q1.)

The Dresdner analysts also noted a subtle change in revenue growth outlook for the full year, from mid-single digits, as announced in February, to "mid single digits at a constant Euro/USD exchange rate."

The Euro to U.S. dollar exchange rate, though, has shifted by about 8 percent, so in real terms the analysts believe Alcatel-Lucent is now expecting its full-year revenues to come in at around €18.4 billion ($24.8 billion), about €1 billion ($1.35 billion) lower than previously expected.

The vendor, at least, is bullish about its second-quarter performance compared with the first three months of the year, forecasting a sequential rise in revenues of 10 percent to €4.27 billion ($5.76 billion).

Investors had been prepared for the poor first-quarter performance, but talk of a strong order backlog and an improved second quarter helped Alcatel-Lucent's share price rise €0.16, about 1.6 percent, to €9.88 on the Paris exchange in early afternoon trading.

— Ray Le Maistre, International News Editor, Light Reading

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