Alcatel-Lucent posts larger loss, blames component shortages

The North American market has started top pick up, and wants more 3G networks

Telecommunications equipment vendor Alcatel-Lucent saw losses grow and revenue drop during the first three months of 2010. Positive signs in some markets were cancelled out by a component shortage.

Alcatel-Lucent reported a first-quarter loss of €515 million (US$661 million), more than the €402 million it lost during the same period in 2009. First-quarter revenue totalled €3.2 billion, down 9.8 percent year-on-year.

Sales could have been higher if component shortages had not prevented Alcatel-Lucent from satisfying a growing demand for its wireless access and optical networking equipment, the company said. Last month, Ericsson blamed similar shortages for its first-quarter performance.

The shortages were in "everyday, low-cost components," according to Alcatel-Lucent's CEO Ben Verwaayen [cq]. Not only did Alcatel-Lucent wake up to a recovery in the market, so did the car and the consumer electronics industries, which competed for components, Verwaayen said in an interview.

Most of the components come out of China, and the Chinese manufacturing industry hasn't been revamped after cuts made during the downturn, according to Verwaayen. Alcatel-Lucent doesn't want to predict when the supply of components will return to normal, but expects a strong sequential recovery, he said.

Revenue in Alcatel-Lucent's networks segment was hit the hardest, dropping by 13.1 percent compared to the year-earlier quarter. Still, growing traffic from smartphones, notebooks and netbooks helped increase the need for new 3G, 4G, optical and IP network equipment, especially in North America, where the use of bandwidth-hungry mobile applications is ahead of, for example, Europe, according to Verwaayen. Meanwhile, demand for GSM networks dropped and LTE (Long-Term Evolution) is still mainly in trials at operators and isn't ready pick up the slack.

Alcatel-Lucent's applications and services segments did somewhat better, and recorded revenue drops of 6.3 percent and 3.1 percent, respectively. In the applications segment revenues were impacted by European companies' continued unwillingness to invest in voice telephony, but sales of data networks grew.

For 2010, Alcatel-Lucent continues to expect growth of up to 5 percent in the telecommunications sector.

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