Managed Services

AlcaLu Revenues Shrink 11% in 2009

Alcatel-Lucent (NYSE: ALU) confirmed its place among the shrinking vendor community today by reporting a 10.8 percent decline in full-year revenues to €15.16 billion (US$20.9 billion) for 2009, and a near 20 percent year-on-year decline in fourth-quarter revenues to €4 billion ($5.5 billion).

Those fourth-quarter revenues were lower than expected, with AlcaLu citing a "significant slowdown" in 3G rollout in China, sequential decline in North America after "a strong third quarter," some "supply chain issues," and intense market competition.

The fourth-quarter revenue numbers were also hampered by exchange rate movements: At a fixed rate, the year-on-year decline would have been less steep, at 16.8 percent.

The Franco-American vendor did, though, report net income of €46 million ($63.4 million) for the final three months of 2009, AlcaLu's first ever quarterly profit, though it was helped by one-time gains of €201 million ($276 million).

However, AlcaLu registered a full-year loss of €524 million ($723 million), worse than analysts had expected.

The company also eased back on its expectations for 2010. AlcaLu expects the market to recover this year, driven by "the explosive growth of mobile Internet," and anticipates the value of the overall global telecom equipment and related services market will increase by up to 5 percent. And, after breaking even in terms of adjusted operating profit for 2009 (after one-time costs are stripped out), it expects the effect of its ongoing cost-cutting program and the green shoots of recovery to help improve its margins.

It has, though, eased back its expectations from hitting an adjusted operating margin of 5 percent in 2010 to achieving between 1 percent and 5 percent for the year.

Although AlcaLu's 2009 profit and loss numbers are a significant improvement from a year ago, investors had hoped for better figures for the fourth quarter and full year, and had anticipated a rosier outlook. As a result, AlcaLu's share price dipped more than 7 percent on the Paris stock exchange to €2.18. (See AlcaLu Ends 2008 With €5.2B Loss.)

Today's news follows recent 2009 financial reports from key AlcaLu rivals Ericsson AB (Nasdaq: ERIC) and Nokia Networks , which saw their full-year sales shrink by 9 percent and 18 percent respectively. (See Nokia Siemens Shrinks 18% in 2009 and Ericsson Keeps Its Distance From Huawei .)

That leaves only Huawei Technologies Co. Ltd. among the main telecom-centric vendors to have reported sales growth for 2009. Huawei and AlcaLu have reported roughly the same figure for 2009 revenues, though the Chinese vendor's numbers are yet to be audited. (See Huawei Claims 2009 Revenues of $21.5B.)

Bright spots in the gloom
Although AlcaLu's revenues dipped 10.8 percent in 2009, two parts of its business grew: Services, which mirrors the segment growth experienced by its main rivals in the professional services market, Ericsson and NSN; and Applications Software, where AlcaLu has been pushing hard to position itself as something of a pioneer. (See AlcaLu CEO Ben Verwaayen, Part II, AlcaLu Shows Off Its Apps Abs, AlcaLu Turns Apps Broker, Ericsson's Services Head Eyes More Growth, NSN Services Chief: Huawei's Years Behind, and Services Now 45% of NSN Revenues.)

As the table below shows, Applications Software revenues grew 8.6 percent to €1.14 billion ($1.56 billion) in 2009, while Services revenues grew 6.4 percent to €3.57 billion ($4.89 billion). Services revenues accounted for 23.5 percent of AlcaLu's total revenues in 2009.

The numbers for the infrastructure lines of business are ugly, with overall Carrier Equipment (optical, fixed access, mobile) revenues down 17.3 percent compared with 2008.

Table 1: Alcatel-Lucent 2009 Revenues by Division
Revenues in � millions Full-Year 2008 Full-Year 2009 % change
Carrier �10,980 �9,076 -17.3
- of which IP �1,225 �1,173 -4.2
- of which Optics �3,215 �2,854 -11.2
- of which Wireless �4,480 �3,544 -20.9
- of which Wireline �2,181 �1,619 -25.8
- of which eliminations -�121 -�114 -5.8
Applications Software �1,045 �1,135 +8.6
Enterprise �1,223 �1,036 -15.3
Services �3,353 �3,569 +6.4
Other and eliminations �383 �341 --
Total �16,984 �15,157 -10.8
Source: AlcaLu

— Ray Le Maistre, International Managing Editor, Light Reading

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