Alcatel-Lucent shrinks loss as it tries to turn around its fortunes

Sales increase in the Asia Pacific region helped improve the company's first quarter result

Alcatel-Lucent's revenue remained flat during the first quarter, although the company made a smaller loss than a year earlier.

Sales for the quarter totalled €3.1 billion (US$4.29 billion as of March 31, the last day of the period reported), down 0.5 percent year on year. The company made a net loss of €101 million, an improvement on the year-earlier loss of €353 million.

Alcatel-Lucent's management is still in the midst of trying to turn around the company. That it swung from a profit during the fourth quarter to a loss in the first highlights that CEO Michel Combes has an uphill struggle ahead.

However, Alcatel-Lucent wasn't the only networking equipment vendor that saw its quarter-on-quarter results worsen. It is suffering from the same malaise as other infrastructure vendors, according to Mark Newman, chief research officer at Informa Telecoms & Media. Investments in wireless networks have trailed off, and because Alcatel-Lucent is in the middle of a reorganization it is more vulnerable than some competitors, Newman said.

Alcatel-Lucent began the year as it ended 2013, implementing its so-called Shift plan, Combes said in a statement. The company is selling business units and shrinking its workforce to cut costs and to focus on IP networking and broadband. Its goal is to become profitable by 2015.

One of the most important events for Alcatel-Lucent during the first quarter was that it received a binding offer from China Huaxin for 85 percent of its Enterprise business unit, which makes IP telephony and Ethernet switching equipment. The deal values the unit at €268 million, and is expected to close during the third quarter, Alcatel-Lucent said.

IP routing was the best-performing product category. Revenue from fixed access, wireless access and IP transport products also increased, while managed services struggled. The best-performing region was Asia Pacific, where sales grew by 19 percent, while sales in all other regions dropped.

On Thursday, Japanese operator NTT DoCoMo announced that Alcatel-Lucent was one of six vendors with which it will conduct experimental trials of emerging 5G technologies. NTT doesn't expect to have a 5G cellular system ready for commercial deployment until 2020, but it's important for Alcatel-Lucent to get a foot in to secure its long-term prospects.

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Mikael Ricknäs

IDG News Service
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