Has Alcatel-Lucent turned the corner?

February 17th, 2012 by · Leave a Comment

This article was authored by Joseph Waring, and was originally posted on telecomasia.net.

It's been a banner week for the French-American network gear vendor. Last Friday Alcatel-Lucent reported its first full-year profit ever, posting earnings of $1.32 billion for 2011 after a loss of $439 million the previous year. With revenue down 2% during the period, that's quite a turnaround involving some serious cost cutting.

While its wireless and fixed-line networks unit showed further weakness with income falling 64% year-on-year in Q4, software and services was the standout business area with operating income surging 73.5% year-on-year. Its enterprise unit also showed strong growth -- increasing 22% from Q410.

CEO Ben Verwaayen has vowed to continue on the cost-cutting warpath, trimming a further $658 million this year, in order to improve the company's operating margin from the 2011 level.

The network equipment provider's results come just two weeks after Ericsson reported a 66% drop in its 4Q earnings and NSN announced plans to cut 4,100 jobs in Germany and Finland as part of its global restructuring program that started last November.

The other big story this week was Alcatel-Lucent claimed the No. 2 spot in the carrier router and switching market with a 19% share in Q4, moving past Juniper (at 16.5%) – a feat it has managed in only twice in the last four years, according ACG Research. The research firm said Alcatel-Lucent posted gains in total carrier routing, ESER, MSER and Carrier Ethernet.

The company also maintained its No. 2 ranking in the global optical market, with a 16% share. The overall market, which was down in 2010, was up almost 10% last year, showing the strongest signs of growth since 2008.

After six years and more than $13 billion in losses, the markets welcomed the news with a 14% jump in its share price last Friday (and continuing to rise slightly this week). But with operators forecasting to cut back on infrastructure capex growth, increasing just 5.7% this year compared to a 29% last year according to ABI Research, the question is this the turning point for Alcatel-Lucent or just another one-off quarter?

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Categories: Financials · Other Posts · Telecom Equipment

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