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IP Remains Alcatel-Lucent's Star Performer

Ray Le Maistre
7/26/2012

Alcatel-Lucent (NYSE: ALU)'s Networks group, which still provides the bulk (63 percent) of the vendor's sales, reported an operating loss and a near 10 percent dip in sales for the second quarter of 2012. Of the group's four divisions, only IP (routers and switches) managed to report an increase in sales.

In total the Networks group reported revenues of €2.23 billion (US$2.72 billion), down 9.9 percent from a year ago, and an adjusted operating loss (before one-time costs) of €57 million ($70 million), compared with an adjusted operating profit of €48 million ($58.6 million) in the second quarter of 2011.

That dip in the sales and profitability of the vendor's core business contributed to the overall 7.1 percent decline in group revenues to €3.55 billion ($4.3 billion) and will have contributed to the decision, announced today, to cut costs and jobs. (See Alcatel-Lucent to Cut 5,000 Jobs.)

The IP division generated revenues of €473 million ($578 million), 16.5 percent better than a year ago. AlcaLu continues to win IP equipment deals, even in hard-hit Europe, and continues to invest in new developments. (See China Telecom Deploys AlcaLu's IP Gear, AlcaLu's APAC Action, Alcatel-Lucent, Cisco Clash Over Core Routers and Alcatel-Lucent, Juniper Get Core-Router Upgrades.)

But the Optics, Wireless and Wireline divisions all reported year-on-year sales declines: Optics suffered a 16 percent decline to €542 million ($664 million), despite market traction for the vendor's single-carrier coherent 100Gbit/s platform; Wireless dipped 18.7 percent to €877 million ($1.07 billion), mostly due to declining CDMA sales and despite LTE sales having grown by 264 percent compared with a year ago; and Wireline declined by 2 percent to €350 million ($430 million), with declines in legacy products almost offset by increasing sales of FTTX systems.

Soft sales for S3
While Networks suffered badly, the vendor's S3 (Software, Services and Solutions) group reported a minor dip in revenues, by just 1.7 percent, to €1.05 billion ($1.29 billion) and an adjusted operating income of €53 million ($65 million), about the same as a year ago.

Within that group, Services revenues grew slightly to €959 million ($1.18 billion) while Network Applications dipped 28.2 percent to €94 million ($115 million), though AlcaLu noted that sales of its customer experience management (CEM) systems were about the same as a year ago. That could be seen as a disappointment following the big push the vendor has been making in that area. (See Euronews: AlcaLu Offers Managed CEM and AlcaLu Gets Motivated About CEM.)

What's left of the vendor's Enterprise group reported revenues of €191 million ($234 million) and an adjusted operating income of €3 million ($3.7 million), roughly in line with a year ago.

— Ray Le Maistre, International Managing Editor, Light Reading

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