AlcaLu Ends 2010 on a High

After a tough 2009 and a shaky start to 2010, Alcatel-Lucent (NYSE: ALU) appears to have not only turned a corner but picked up some business momentum.

The vendor today announced its fourth-quarter and full-year 2010 financials that showed across-the-board improvements. In addition, the company expects to grow faster than the market in 2011 and increase its operating profit margins. Investors liked what they saw, as AlcaLu's stock leapt by 11.4 percent on the Paris bourse to €2.97.

Fourth-quarter revenues grew by 19.3 percent compared with a year earlier to €4.86 billion (US$6.63 billion), while full-year revenues increased by 5.5 percent to almost €16 billion ($21.8 billion), confirming AlcaLu's place as the third-largest telecom systems vendor by revenues. (See Huawei Annual Revenues Hit $28B.)

Its disappointing start to the year, though, meant AlcaLu still reported an operating loss and net loss for the full year. (See AlcaLu Feels the Squeeze in Q1.)

Table 1: Alcatel-Lucent Q4 2010
All figures in � millions Q4 2009 Q4 2010 YoY change
Revenues 3,967 4,862 22.6%
Operating income 140 304 117%
Net income 95 352 271%

Table 2: Alcatel-Lucent Full Year 2010
All figures in � millions 2009 2010 YoY change
Revenues 15,157 15,996 5.5%
Operating loss -692 -309 55.3%
Net income -504 -292 42.1%

Looking ahead, CEO Ben Verwaayen noted that he is "more confident than ever in our ability to transform into a normal company" (i.e. one with growth and profits), and noted that for 2011, "we feel confident to grow faster than our addressable market and aim at a significant increase in profitability with an adjusted operating margin above 5% of 2011 sales."

In the fourth quarter, all divisions within the networks group reported year-on-year sales increases, with IP revenues reaching €508 million ($692 million), a near 60 percent increase compared with €317 million ($432 million) a year earlier. AlcaLu noted that ongoing IP transformation projects, the migration to packet backhaul, and the first deployments of its 100Gbit/s Ethernet cards (deployed by eight operators) contributed to that growth.

The vendor also cited growth in wireless (including a 56 percent increase in 3G revenues), fixed access (GPON, IP DSLAM), optical transport equipment and applications. Services revenues increased by 10.7 percent to €1.14 billion ($1.55 billion).

Why this matters
Since he took over, Verwaayen has been on a mission to turn the company around -- to engineer a return to "normality" as he calls it -- and he appears to have made significant progress in 2010.

That's important not only for AlcaLu, its partners and its investors, but for the rest of the sector too, as, along with the end-of-2010 upticks at Ericsson AB (Nasdaq: ERIC) and Nokia Networks , it hints at a more stable telecom technology and services sector that could deliver growth this year. (See Signs of Growth at NSN and Ericsson Q4 Sales Surge, Margins Shrink .)

For more
AlcaLu has been re-asserting itself in some key technology sectors in the past year, most notably in recent days in the wireless infrastructure market:

— Ray Le Maistre, International Managing Editor, Light Reading

Stevery 12/5/2012 | 5:13:11 PM
re: AlcaLu Ends 2010 on a High

I am quite pleasantly surprised.  Kudos Lucatel.

Now since Ben Verwaayen was around LU during its channel stuffing days, I would go searching to make sure this isn't just financial chicanery.  But I'm just a cynic.

James_B_Crawshaw 12/5/2012 | 5:13:09 PM
re: AlcaLu Ends 2010 on a High

Trade receivables / LTM sales was 24% at the end of 2010, only slightly up from 23% in 2009 so I don't see a risk of channel stuffing. But Alcatel has often reported a good quarter or two in the past before the inevitable disappointment. And they seem to be backing away from prior guidance of 5-9% operating margins this year - they now say >5%.  Oh, and that is before another EUR400m of 'exceptional' restructuring costs which seem to recur fairly consistently ... 

Doodles 12/5/2012 | 5:12:52 PM
re: AlcaLu Ends 2010 on a High

I have to admit that I am impressed by ALU's Q report.  Yes, ALU has been hard pressed to string even two good Qs.  But lets face it, Ben inherited a disaster from Russo, so inconsistency over the last couple of years, characterized by billions in losses, is not surprising.  Clearly ALU has a long way to go....not the least of which is eliminating annual restructuring charges in the 300M Euro range, as well as significantly improving their net cash position.  But as the former is largely a legacy of a poorly coceived merger, I expect the restructuring charges to continue for a few more years.....but that improved profitability will likely make those costs much more palatable going forward.  ALU has benefitted from new leadership, and I think, the luck of the draw.....where exploding demand for bandwidth has tracked well with management business decisions over the last two years. I think ALU will perform unexpectedly well in 2011, with the current Q being quite strong due to the current LTE buildout in North America.   Lastly, I am not sure what RadioLight will do for the company....in 2012...but at this early juncture, even without further details, the technology is clearly impressive.....

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