Revenues were €4.33 billion, a marked increase from the first quarter but down by 4 percent from the pro forma €4.49 billion a merged Alcatel and Lucent would have reported in the second quarter of 2006, as the table below shows. (See Alcatel-Lucent Reports Q1.)
Table 1: Alcatel-Lucent Revenues (in �) by Business Line Q1 2006 - Q2 2007
|In Euros (millions)*||Q1 2006||Q2 2006||Q3 2006||Q4 2006||Q1 2007||Q2 2007|
|(of which Wireline)||1,342||1,459||1,447||1,454||1,287||1,505|
|(of which Wireless)||1,495||1,397||1,674||1,249||1,204||1,237|
|(of which Convergence)||503||511||585||495||348||362|
|Other and eliminations||77||56||66||-15||46||96|
|* Figures for 2006 quarters are all pro forma -- what the revenues would have been had Alcatel and Lucent merged on January 1, 2006.|
The net loss of €586 million includes €250 million in non-cash charges (referred to as purchase price allocation entries) related to the merger of Alcatel and Lucent, which was completed at the end of November last year. (See Farewell, Lucent and Alcatel, Lucent Merge.)
Discounting those non-cash charges, the adjusted net loss was €336 million ($460 million), compared with an adjusted pro forma net profit of €302 million ($414 million) in the same period a year ago.
That adjusted loss includes a number of one-off items –- including an "impairment charge related to W-CDMA assets" of €298 million ($408 million) -- that, together, accounted for €176 million ($241 million) of the second quarter's adjusted losses.
The numbers were also affected by a low gross margin rate of 33.4 percent. The vendor says that number was hit by "significant investments in key markets," an "unfavorable" mix of product and geographic sales, and "product related transition costs" as customers deploy new networks, and that "the gross margin level this quarter is not indicative of the business going forward."
Investors, although braced for another challenging set of financials, didn't like what they saw, and AlcaLu's share price dropped by €0.79, more than 8 percent, to €8.80 on the Paris stock exchange. (See Merger Tears Into AlcaLu's Sales, AlcaLu Details Q1 Woes, and Alcatel-Lucent Suffers Stock Shock .)
Since the beginning of this year, the company's share price has dropped by 12 percent, reflecting its merger-induced problems.
So where is AlcaLu feeling the pain? Mostly in mobile and traditional voice systems.
Its Carrier Business unit reported revenues of €3.1 billion ($4.2 billion), down 8 percent from a year ago (see table). Wireline revenues were up 3 percent at €1.5 billion ($2 billion), with strong performances from the vendor's access and optical (terrestrial and submarine) lines of business, but wireless was down 11 percent at €1.24 billion ($1.7 billion), hit mainly by low sales of GSM infrastructure in Africa and Eastern Europe.
The company is boasting, though, of traction in the WiMax market, where it claims to have 70 trial systems deployed. (See French JV Pushes on With WiMax, AlcaLu Partners in Russia, AlcaLu Scores WiMax Wins, Casema Tests With AlcaLu, and AlcaLu Wins WiMax Deal.)
Also in decline is the Carrier Business unit's Convergence business, which includes TDM and IP-based voice switching systems, including the company's IMS (IP Multimedia Subsystem) portfolio. Revenues dipped 29 percent year on year to €362 million ($496 million) as the increase in "next generation core" sales couldn't make up for the slump in "classic core switching revenue."
AlcaLu's Enterprise unit fared better, reporting revenues 2 percent higher at €376 million ($515 million), with a "strong performance in Western and Eastern Europe."
The Services Business unit also grew, with revenues up 7 percent to €750 million ($1 billion) boosted by continued demand for IP transformation and multi-vendor maintenance services.
Overall, AlcaLu's management says the company is showing signs of recovery after an initial difficult post-merger period. "As we have said, 2007 is clearly a transition year for the company as we continue to execute on our integration plans in a rapidly changing industry," stated CEO Pat Russo in a prepared statement ahead of the company's earnings conference call. "We are seeing the benefits of the merger with momentum building in our order flow for the second consecutive quarter. As a result, our order backlog at the end of the second quarter 2007 continues to improve compared to first quarter 2007," she added.
The vendor expects revenues to climb sequentially during the next two quarters, and is sticking to its full-year revenue growth target of mid single digits (around 5 percent) at a constant euro/dollar exchange rate. However, as the real-world euro/dollar exchange rate is not constant, the actual reported growth in 2007 is likely to be below that 5 percent target.
Alcatel-Lucent's management is hosting a conference call at 1pm Central European time (noon in London, 8am New York) today.
— Ray Le Maistre, International News Editor, Light Reading