The Canadian Press - ONLINE EDITION
Alcatel-Lucent posts wider than expected loss
PARIS - Alcatel-Lucent SA reported Friday that its net loss in the second quarter was a wider-than-expected €184 million (US$240 million) but said it remains on track for an improvement in profitability this year.
The French-U.S. telecommunications equipment supplier said in a statement that it still aims to achieve adjusted operating margin, the company's preferred barometer for profitability, between 1 and 5 per cent this year, after reporting a 0.7 per cent margin in the second quarter.
Analysts had estimated Alcatel-Lucent's second quarter loss at €44 million, compared to a €14 million profit a year earlier, when earnings were lifted by a €255 million gain on the sale of the company's stake in French defence contractor Thales SA.
Sales of Alcatel-Lucent's networking gear and related services fell 2.4 per cent compared to the year earlier quarter to €3.8 billion, an improvement on the nearly 10 per cent drop seen in the first quarter when an industrywide components shortage caused the group to rack up hundred of millions of new losses.
Chief Executive Ben Verwaayen said that while the supply chain remains stretched "the demand for telecommunications equipment and related services is recovering" thanks to booming data traffic and demand for improved network efficiency.
The company said those factors will help the global market for its networking gear to stabilize or grow up to 5 per cent this year, after several years of contraction as the recession and years of capacity expansion caused carriers to slash spending.
"Alcatel-Lucent is preparing for a strong second half of the year, backed with a growing order book," Verwaayen said, forecasting higher sales and lower costs will spur a "significant" improvement in operating profit. Last year Alcatel-Lucent's adjusted operating income, a measure that excludes charges related to its 2006 trans-Atlantic merger, was a loss of €56 million.
Total losses generated by the company since the merger now top €9 billion, and Verwaayen has warned investors not to expect a full-year profit until 2011.
Alcatel-Lucent blamed the steep second quarter loss on its decision to significantly boost its inventory of components such as transistors, memories and integrated circuits during the quarter, in response to shortages earlier in the year as the economic recovery spurred demand across a wide array of sectors, from automakers to consumer electronics companies.
Its stockpile of components should help avoid a repeat of the first quarter, when shortages of the basic parts meant Alcatel-Lucent couldn't fulfil all its orders, leading to a €515 million net loss.
Alcatel-Lucent supplies telecommunication carriers such as AT&T, Verizon and France Telecom. It was formed through the 2006 merger of France's Alcatel with Lucent, based in Murray Hill in New Jersey. It competes with European rivals such as LM Ericsson AB of Sweden and Nokia Siemens Networks of Finland.
Alcatel-Lucent shares jumped 6.3 per cent to €2.20 in early trading on the Paris stock exchange as investors welcomed the group's return to operating profitability.
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