AlcaLu Under Pressure
The vendor reported revenues of €3.8 billion (US$5.26 billion), down 6.8 percent year-on-year, and a net profit of €194 million ($268 million), better than the €25 million reported a year ago, with the company's gross margin improving by 2.5 percentage points to 36.3 percent. However, its sales and profits fell short of market expectations.
AlcaLu also warned that "market uncertainties" and unpredictable spending by carriers, especially in Europe, would lead to lower than expected fourth-quarter revenues. As a result the vendor's full-year adjusted operating margin (after one-time costs) is expected to be around 4 percent compared with the 5 percent or better that AlcaLu's management had forecast.
To counter "economic uncertainties," AlcaLu is set to cut a further €200 million ($277 million) from its annual fixed costs (mainly from its sales, general and administrative costs) and shave €300 million ($415 million) a year from its variable costs (mainly by improving "project and delivery efficiency"). It's unclear what impact these measures might have on the company's headcount numbers.
The financial markets responded accordingly, with AlcaLu's share price dropping by 12.4 percent to €1.76 in morning trading on the Paris exchange.
In regional terms, reduced sales in Asia/Pacific and Europe (down 18.4 percent and 11.6 percent respectively) accounted for the year-on-year dip in revenues. Sales in North America were roughly in line with a year ago, with CDMA EV-DO and LTE wireless equipment revenues growing.
Among the vendor's product units, only the IP division, with revenues up by 2.7 percent to €376 million ($520 million) and the Enterprise division, with sales up 8.9 percent to €319 million ($441 million), performed better than a year ago.
Ironically, AlcaLu has been trying to sell its Enterprise division but has managed only to offload part of it, agreeing the sale of its Genesys contact center systems line of business for $1.5 billion. (See Euronews: AlcaLu Confirms $1.5B Asset Sale and AlcaLu's Spare Limb.)
— Ray Le Maistre, International Managing Editor, Light Reading