AlcaLu Reports Q4 Loss of €2.6B

Alcatel-Lucent (NYSE: ALU) still hasn’t shaken off its lingering financial woes. The giant vendor today reported a net loss for its fourth quarter of 2007 of €2.58 billion ($3.7 billion) after it included a combined write-down for its CDMA infrastructure and IMS (IP Multimedia Subsystem) lines of business of €2.52 billion ($3.65 billion).

Without the write-down and other one-time charges, AlcaLu reported a fourth quarter net loss of €48 million ($70 million), while analysts had been expecting a net profit after charges of around €180 million ($261 million).

The news, and a very muted outlook for 2008, sent the firm’s share price down by 1.2 percent to €4.08, giving AlcaLu a market valuation of €9.4 billion ($13.6 billion). The stock is down 16.6 percent this year, and compares badly to the €10.12 the shares commanded when AlcaLu opened its doors for business about 14 months ago.

The four quarter losses capped a year of disappointing announcements for the company, which began operations as a merged vendor giant on Dec. 1, 2006. (See Russo Shakes Up AlcaLu's Top Team, AlcaLu Cuts 4,000 More Jobs, AlcaLu Cuts 2007 Outlook by $1.25B, Quigley, D'Amelio out at AlcaLu, AlcaLu's Russo: We're Under Attack!, and Merger Tears Into AlcaLu's Sales.)

At least the company’s sales headed in the right direction. Fourth quarter revenues were €5.23 billion ($7.6 billion), up 18 percent compared with a year ago and up 20 percent sequentially. CEO Pat Russo said on today’s conference call that the revenues were higher than expected, driven by strong growth in optical gear, IP equipment, GSM infrastructure, and services. (See AlcaLu: The Network Integrator.)

The full year numbers aren’t so pretty, though. Revenues totaled €17.79 billion ($25.8 billion), down 2.5 percent compared with pro forma numbers for the previous year (the revenues Alcatel-Lucent would have generated as a combined company for the whole of 2006). Without the one-time charges, the net loss for 2007 was €443 million ($643 million), compared with a pro forma net income (profit) for 2006 of €522 million ($757 million).

See the table below for the full set of comparisons.

Table 1: AlcaLu Q4 and Full Year 2007 Top Line Numbers
In � millions Q4 2007 Q4 2006* Full year 2007 Full year 2006*
Revenues 5,234 4,421 17,792 18,254
Gross profit 1,694 1,447 5,962 6,842
Gross margin 32.40% 32.70% 33.50% 37.50%
Operating income** 303 -3 110 925
Net loss** -48 -618 -443 522
* Pro forma numbers, as if Alcatel and Lucent had merged on January 1 2006
** Excluding one-time items, such as writedowns

Despite the significant leap in fourth quarter revenues, not all of AlcaLu’s lines of business managed to grow compared with a year earlier. The ‘Convergence’ unit within the vendor’s Carrier Business Group was the one part of the business that shrunk.

Michel Rahier, who heads up Carrier Business, said the unit, which includes the vendor’s traditional voice switches, IMS products (softswitches, media servers, etc), and applications (including IPTV and business applications), has suffered from ongoing streamlining and restructuring during 2007, and that IMS had shown “significant growth” in the fourth quarter. No specific numbers were provided.

For the full year, the Convergence and Wireless (mobile infrastructure) units, two of the three Carrier Business units, shrank in terms of revenues, while Wireline (optical, IP, access) grew, as did Services and Enterprise. (See table below.)

Table 2: AlcaLu Q4 and Full Year Revenues by Business Line
Revenues in � millions Q4 2007 Q4 2006* Full year 2007 Full year 2006*
Carrier Business Group 3,734 3,214 12,819 13,644
- of which Wireline 1,691 1,470 6,003 5,735
- of which Wireless 1,570 1,249 5,287 5,815
- of which Convergence 473 496 1,529 2,094
Enterprise 435 419 1,562 1,491
Services 1,020 803 3,173 2,935
Others and eliminations 45 -15 238 184
Total group revenues 5,234 4,421 17,792 18,254
* Pro forma, as if Alcatel and Lucent had merged on January 1, 2006

The poor performance of Wireless and Convergence dragged the Carrier Business group into the red for the full year, as it reported an operating loss of €151 million ($219 million) in 2007, compared with a pro forma net profit of €802 million ($1.16 billion) in 2006.

CEO Russo also warned that 2008 isn’t shaping up to be a very good year either for AlcaLu, though she did note that gross margins, which stood at 33.5 percent in 2007 (down from 37.5 percent in 2006) are set to grow as cost cutting and more selective contract engagement procedures kick in.

Russo said the company expects the usual seasonality factor to result in a sharp drop in revenues for the first quarter of 2008, and noted that the company expects to report an operating loss for the first three months of this year.

She also noted that, due to the ongoing competitive environment, a level of uncertainty over macro economic trends (a potential global recession), trends such as network sharing among carriers (which reduces capital expenditures), and the strength of the Euro against the dollar, 2008 full year revenues (in Euros) might be slightly down.

— Ray Le Maistre, International News Editor, Light Reading

Belzebutt 12/5/2012 | 3:48:09 PM
re: AlcaLu Reports Q4 Loss of €2.6B Doesn't NT report next? Last year it was Feb 7th. How come NT is never shown ahead of time in LR's earnings calendar?
digits 12/5/2012 | 3:48:09 PM
re: AlcaLu Reports Q4 Loss of €2.6B Nortel reports week of Feb 25, so you'll have to wait a few weeks for that particular treat!
Fibre Bundle 12/5/2012 | 3:48:08 PM
re: AlcaLu Reports Q4 Loss of €2.6B It takes Cisco 7 days to close its books on a quarter. It takes Nortel 7 weeks.

tmc1 12/5/2012 | 3:48:07 PM
re: AlcaLu Reports Q4 Loss of €2.6B "It takes Cisco 7 days to close its books on a quarter. It takes Nortel 7 weeks."

Pretty much says it all...
45rpm 12/5/2012 | 3:48:04 PM
re: AlcaLu Reports Q4 Loss of €2.6B Does it take NT time to cook the books on a low simmer until they are ready to serve?
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