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Alcatel Profits, Forecasts Drop

Alcatel SA's (NYSE: ALA; Paris: CGEP:PA) profits for its first quarter fell nearly 19 percent from a year ago, as the company announced its earnings before the U.S. stock market opened today (see Alcatel Q1 Sales Up 24%).

Even though Alcatel took down its growth expectations for the next quarter, the company did attempt a guess at where its business would be. That, along with Alcatel's gains in the European market today, helped inch Alcatel's stock up 0.90 (3%) to 30.40 around midday.

For the quarter, Alcatel said its net profits were 210 million euros (US$189.12 million), or 18 cents (European) a share. That's a nearly 19 percent drop from Alcatel's year-ago quarter, which had earnings of 258 million euros (US$232.34 million), or 26 cents a share. (Alcatel figured its first-quarter 2001 earnings per share based on 1.17 billion shares versus 985 million shares as of a year ago).

Alcatel CEO Serge Tchuruk said he was pleased that sales to service providers from the firm's carrier networking and optics units grew some 40 percent year-over-year. But he said that U.S. sales of Alcatel's Litespan carrier access boxes had dropped off toward the end of March.

Though its telecom sales were up 24 percent in Q1, Alcatel said its total telecom sales growth, which includes its e-Business unit, will be in the single digits for the quarter.

"Providing full year guidance given current lack of visibility is a hazardous undertaking," Tchuruk said in a prepared statement. "At this point in time, our best effort forecast for the year is that sales growth will be positive and come in between 5% and 15%. Income from operations should grow at a faster rate."

Alcatel had previously forecast telecom sales growth of 20% to 25%, with operating profit expansion of twice that, according to the analysts at Commerzbank in London. Still, analysts overall were confident that Alcatel's efforts to cut costs will offset the firm's near-term slowdown.

Those cost-cutting measures include outsourcing telephone handset production in Europe to Flextronics International (Nasdaq: FLEX), along with transferring 830 employees to the contract manufacturer. This and other measures should cut Alcatel's costs by about one billion euros (about US$900 million).

-- Phil Harvey, Senior Editor, Light Reading http://www.lightreading.com
paulglen 12/4/2012 | 8:30:50 PM
re: Alcatel Profits, Forecasts Drop The headline seems to have a quite negative focus, but the article itself is relatively well balanced. I'm of the opinion that the glass is half full here. It's interesting to contrast the increase in top line revenues in the quarter vs decreases in some of the other "big boys".
DCITDave 12/4/2012 | 8:30:50 PM
re: Alcatel Profits, Forecasts Drop The original headline -- "Alcatel's quarterly profits and forecasts have dropped but things don't look so bad in the long-run because they're cutting costs in several places but it remains to be seen how well they'll do in the next two quarters because visibility ain't what it used to be" -- got cut down by my editors.

Damn editors.

ph
skeptic 12/4/2012 | 8:30:43 PM
re: Alcatel Profits, Forecasts Drop
Alcatel's attempts at outsourcing to cut costs
will lead nowhere. The outsourcing is a good
idea, but Alcatel's real problem is that many
of its products are long in the tooth with
nothing new on the horizon.

And it could easily end up like Lucent if many
of their mature product lines start to end of
life.

Several years and several billion dollars later, they still don't even have data products to compete with nortel, let alone cisco or juniper.

And for unknown reasons, they are spending huge
amounts of money on media ads that are as close as anyone has ever come to a "negative
branding" campaign that makes people dislike
them without knowing anything about them.





gladysnight 12/4/2012 | 8:30:41 PM
re: Alcatel Profits, Forecasts Drop skeptic,

you shouldn't discount the effects of moving nearly 1,000 employees to the outsourcers books.

If the down-turn continues, having relieved themselves of the redundancy costs for those employees could be quite significant to Alcatel, especially considering the rather draconian (compared to US) employment laws common in EU countries.
PBC 12/4/2012 | 8:30:25 PM
re: Alcatel Profits, Forecasts Drop http://www.theregister.co.uk/c...

PBC

PBC 12/4/2012 | 8:30:20 PM
re: Alcatel Profits, Forecasts Drop http://biz.yahoo.com/rf/010427...

Only losers respond to their own posts...call me loser!

-Pierre
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