Alcatel-Lucent reports 4th quarter net profit but revenue disappoints in the period

By Greg Keller, AP
Thursday, February 11, 2010

Alcatel-Lucent makes small 4th quarter profit

PARIS — Telecommunications equipment maker Alcatel-Lucent SA on Thursday reported a small net profit for the fourth quarter as one-off gains helped offset a 20 percent drop in revenue.

Paris-based Alcatel-Lucent made a net profit of euro46 million ($63 million) in the fourth quarter, compared to a euro3.9 billion net loss a year earlier, when earnings were hammered by charges to write down assets due to what it called “the drastic deterioration of the global economic outlook.”

In a statement, Alcatel-Lucent said the economic environment “appears to be stabilizing” and that it expects its markets to recover in 2010.

Alcatel-Lucent’s fourth quarter profit was the result of one-off gains on a change in how it accounts for a post-retirement benefit plan, as well as a euro99 million capital gain on the sale of one of its non-core businesses.

Alcatel-Lucent said revenue fell 19.9 percent in the three months to Dec. 31 to euro3.97 billion.

The drop in revenue during the fourth quarter was at the low-end of company forecasts, which Alcatel-Lucent blamed on a double-digit drop in sales of older technologies such as 2G wireless, as operators have slashed investment in response to the global economic slowdown.

During the fourth quarter France Telecom SA, one of Alcatel-Lucent’s biggest customers, said it had sharply cut back its capital spending in a bid to conserve cash and focus on reducing its debt.

Alcatel-Lucent shares rose 56 percent last year as some investors speculated it could be a target in the next round of industry consolidation. Company Chief Executive Ben Verwaayen said last year that the company wasn’t in any merger and acquisition talks.

In early trading Thursday Alcatel-Lucent shares fell 3.6 percent to euro2.26.

For the full year, Alcatel-Lucent reported a loss of euro524 million, on revenue of euro15.2 billion.

The company forecast overall market growth of between zero and 5 percent this year, helped by operators’ investment in next-generation networking technologies.

On Wednesday, AT&T Inc. said it had selected Alcatel-Lucent and LM Ericsson AB of Sweden to supply the equipment for a new wireless network that will provide data speeds that are at least ten times faster than today’s wireless broadband.

AT&T plans to start service on the network in some cities next year, using a technology called LTE, or Long Term Evolution.

Alcatel-Lucent has struggled for years to justify the 2006 trans-Atlantic merger that created it with the aim of becoming a global telecommunications leader. Losses racked up by the company since then now top euro9 billion, and the company has warned investors not to expect it to return to the black before 2011.

The company has been slashing costs and cutting its workforce as part of a three-year turnaround plan introduced by Verwaayen last year. Thursday Verwaayen said the company is “on the right track to become a normal company by 2011.”

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