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Charges Slam AlcaLu's Q2

Ray Le Maistre
7/30/2013

Alcatel-Lucent reported a headline-grabbing net loss of €885 million ($1.17 billion) for the second quarter of 2013 as it re-assessed the value of its assets and booked a significant restructuring charge. (See AlcaLu Reports Q2 Loss of €885M.)

But CEO Michel Combes, who has initiated a 'Shift Plan' designed to get the company back on its feet, will take some heart from the slight improvements in sales and margins compared with a year ago and once again be thankful for the vendor's IP division, which once again was the company's star performer. (See Alcatel-Lucent Unveils Shift Plan.)

He'll also be thankful for the reaction of the financial markets, as the vendor's share price jumped by 7.6 percent to €1.72 on the Paris exchange early Tuesday. That rise might have also been helped by confirmation of AlcaLu's expanded collaboration with Qualcomm Inc. (See Report: Qualcomm to Take Small Cell Stake in AlcaLu.)

AlcaLu reported revenues of €3.6 billion ($4.78 billion), up 1.9 percent from a year ago and 12 percent better than the first quarter. The IP division, around which Combes is re-building the company, posted another set of impressive figures, generating sales of €624 million ($828 million), up 20.9 percent from a year ago and 26.6 percent better than the first quarter's revenues. (See Alcatel-Lucent Builds Future Around IP.)

The vendor had a particularly strong quarter in North America, generating revenues of €1.64 billion ($2.18 billion), 17.1 percent better than a year ago.

AlcaLu's second quarter gross margin was 31.9 percent, roughly in line with a year ago and in the same ballpark as Ericsson AB (32.4 percent). (See Ericsson Gets the Margin Jitters.)

And AlcaLu achieved an operating profit of €24 million ($32 million), better than expected by the financial analyst community and an improvement on the operating losses reported a year ago and in the first quarter.

But the net loss of €885 million was more than doubled year-on-year and sequentially, due to restructuring costs of €194 million ($258 million), an asset impairment charge of €552 million following an assessment of the vendor's assets and various other one-time charges.

Optical orders
AlcaLu's various divisions had a mixed quarter, with Networks posting improved sales but managed services reporting an almost 15 percent year-on-year decline in revenues to €215 million ($285 million) as the company exits loss-making and low-margin engagements (it has now "addressed" 14 of the 15 deals identified as part of its Performance Program restructuring efforts).

In the Networks division, the IP product line was the best performer, while Wireless kept its revenues just above the €1 billion ($1.33 billion) mark, including a contribution from LTE products of more than €200 million ($265 million), higher than CDMA revenues for the first time.

The Optical platforms business reported a 7 percent year-on-year decline in revenues to €422 million ($560 million), but AlcaLu noted that WDM product sales increased slightly and that the order book was up by 40 percent compared with a year ago. Of its WDM line cards, 100G products accounted for 27 percent of shipments, up from 19 percent in the first quarter.

— Ray Le Maistre, Editor-in-Chief, Light Reading

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RobPG
RobPG
7/30/2013 | 8:55:15 PM
re: Charges Slam AlcaLu's Q2
Close down your money losing divisions like optical, or at least quit selling gear near cost...
Ray Le Maistre
Ray Le Maistre
7/30/2013 | 3:31:12 PM
re: Charges Slam AlcaLu's Q2
Combes needs a few more quarters of IP division growth and North American spending still.... ALU still looks like it's driving close to the edge of the road, and selling small stakes to the likes of Qualcomm is not going to have much impact on its cash flow.
sam masud
sam masud
7/30/2013 | 3:25:58 PM
re: Charges Slam AlcaLu's Q2
To put a gloss on a $1 billion-plus loss is, as that great political sage would say, like putting lipstick on a pig.
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