AlcaLu Ends 2010 on a High

News Analysis Ray Le Maistre, Editor-in-Chief 2/10/2011

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