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AlcaLu Issues Full-Year Profit Warning

Only a day after ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) announced a profit warning, Alcatel-Lucent (NYSE: ALU) has announced it does not expect to achieve its full-year operating profit margin targets due to "the difficult macro-economic environment" and the company's poor first half performance. (See ZTE Issues H1 Profit Warning.)

AlcaLu had previously said it was on course to improve its adjusted operating margin in 2012 compared with last year. In 2011, the vendor reported adjusted operating income (after one-time costs) of €610 million (US$750 million) and revenues of €15.7 billion ($19.3 billion), giving it an adjusted operating profit margin of 3.9 percent.

The revision sent AlcaLu's share price into freefall on the Paris stock exchange: By mid-morning it was down 14.7 percent to €0.97, giving the company a market value of €2.25 billion ($2.77 billion).

First-half struggle
AlcaLu noted that it's set to report a second-quarter adjusted operating loss of about €40 million ($49 million) from revenues greater than €3.5 billion ($4.3 billion) when it unveils its full earnings report on July 26.

In the first quarter the company reported an adjusted operating loss of €221 million ($272 million) from revenues of €3.2 billion ($3.94 billion). (See Bad Start to 2012 for AlcaLu.)

That means for the first half of 2012, AlcaLu will be reporting an adjusted operating loss of €261 million ($321 million) from revenues of €6.7 billion ($8.24 billion), giving it an adjusted operating margin of -3.9 percent.

Based on current orders, the company expects the second half of 2012 to be better than the first, but that will offer little comfort to the company's customers, staff, partners and investors.

What will Ben Verwaayen do next to improve the company's fortunes? So far he has avoided imposing massive cuts to the company's workforce of about 78,000 -- something that Nokia Networks was forced to do -- or selling off core operations. Those options are looking increasingly likely. (See Euronews: AlcaLu Job Cuts on the Cards? and NSN Could Lose More Than 17,000 Staff.)

— Ray Le Maistre, International Managing Editor, Light Reading

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gtchavan 12/5/2012 | 5:27:48 PM
re: AlcaLu Issues Full-Year Profit Warning

You mentioned this news is little comfort to Alcatel customers, why?  Telco's have been happily taking the extra $100 bill shipped with every box.  

paolo.franzoi 12/5/2012 | 5:27:48 PM
re: AlcaLu Issues Full-Year Profit Warning

 


Who were upset at the low ALU stock price since it had clearly turned things around?


seven


 

macster 12/5/2012 | 5:27:46 PM
re: AlcaLu Issues Full-Year Profit Warning

What usually happens when it falls below a dollar?

ninjaturtle 12/5/2012 | 5:27:44 PM
re: AlcaLu Issues Full-Year Profit Warning

Huh CIEN has ben attaching hundred dollar bills for years to every line card they sell and $1000 for common equipment. AlcaLu is the next Nortel. Break up and sell business units is there only exist plan. 

ecipo 12/5/2012 | 5:27:43 PM
re: AlcaLu Issues Full-Year Profit Warning

They claim to have the best products in the market, that the turnaround is just coming but continue to underperform for market reasons they claim. At the very same time the perform worse than their peers and the market they blame. There is a huge problem with this company and it's not the market they're in.


Please bring Quigley back!

ingenieur 12/5/2012 | 5:27:43 PM
re: AlcaLu Issues Full-Year Profit Warning

Was it a correct decision to acquire Lucent for Alcatel in 2006? why not buy it until Lucent declared bankruptcy?

ninjaturtle 12/5/2012 | 5:27:43 PM
re: AlcaLu Issues Full-Year Profit Warning

Classic dilusial denial by management until the walls cave in. 

Ktan8888 12/5/2012 | 5:27:42 PM
re: AlcaLu Issues Full-Year Profit Warning

I am sure the next acquirer will wait until they are bankrupt..

digits 12/5/2012 | 5:27:42 PM
re: AlcaLu Issues Full-Year Profit Warning

Some intersting message board posts here, some of which I even understand!


Some thoughts and clarifications:


ALU's share price dropped below 1 euro on the Paris stock exchange, not below $1 on the NYSE. Why would anyone care? It's a psychological issue rather than one that trriggers any penalties - it is shocking. The company has lost more than 90% of its value since it was formed and is now valued at far less than the revenues it books in any quarter. It's an alarm bell. For the record, ALU's share ended Tuesday at $1.11 on the NYSE.


 


If I was an ALU operator customer I would not be blase about the financial fate of a critical supplier. Alcatel-Lucent is in a tailspin and it's going to hurt a lot of companies if it doesn't dig itself out of its hole.


 


Would a change of senior management help or hinder right now? Who knows. Mike Quigley isn't coming back though.


 


Ericsson reported today -- it has also been clobbered by the CDMA crash, a slowdown in China, macro economics etc etc -- but is is also generating a profit, is seeing the benefits of its M&A activities and has positioned itself to gain from network modernization projects in Europe. Ericsson, at this point in time, appears to have played a better game. NSN numbers (the little that Nokia reveals) are out tomorrow -- I imagine they will lean more towards the ALU side of the divide than Ericsson.


 


here's a thought - and it's just a thought, like a party game. Where would ALcatel-Lucent be now if Gary SMith had been appionted CEO instead of Pat Russo?

macster 12/5/2012 | 5:27:42 PM
re: AlcaLu Issues Full-Year Profit Warning

Sometimes, it's better to wait for others in the same vertical to report their results, before spewing......


Check out E///'s earnings report. And Zhongxing's. And others.....

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