Alcatel-Lucent Q1 Losses Widen - Aims for Break Even by Year-End

Alcatel-Lucent has reported worse than expected losses for the first-quarter of 2009, but reiterated its expectation to break-even by the end of the year. First quarter revenue decreased 6.9% year-over-year and 27.4% sequentially to EUR 3.6 billion (US$4.8 billion). At constant currency exchange rates, revenue fell by 11.2% year-over-year and 28.3% sequentially, with a mixed performance among each of the four segments. 

The loss before interest and tax was EUR 254 million (US$336 million), compared with an adjusted operating profit of EUR 36 million in the year-ago quarter. The net loss widened to EUR 402 million (US$535 million) from EUR 181 million a year ago. Both the year-over-year and sequential declines in gross margin were largely driven by volumes and the product/geographic mix.

Ben Verwaayen, CEO, commented: "While expected, given seasonality and tough market conditions, we are not pleased with the operating loss incurred in the first quarter. Our guidance for the year remains unchanged and we are taking appropriate actions".

The company said that on the one hand, Carrier and Enterprise revenues declined at double-digit rates year-over-year at constant currency, reflecting capital constraints in fixed and mobile access, switching and enterprise voice telephony, only partly offset by the growth in IP, W-CDMA and submarine optics. On the other hand, Applications software revenues grew at a mid-single digit rate at constant currency while Services revenues grew in the high teens. From a geographic standpoint, the decline is largely attributable to North America where revenues decreased 28% year-over-year at constant currency and to a lesser extent Asia Pacific (-8%), while Europe (-1.5%) and the rest of the world (+1%) showed good resilience.

The company continues to expect the global telecommunications equipment and related services market to be down between 8% and 12% at constant currency in 2009. The company still anticipates an adjusted operating profit around break-even in 2009.

As far as simplifying the organization structure is concerned, 290 management positions have been eliminated out of the 1,000 planned. The number of contractors has been reduced by about 770 out of the 5,000 plan. In all, the company still projects that, by the fourth quarter 2009, on an annual run rate basis, it should achieve total cost and expense savings of Euro 750 million at constant exchange rate.

Posted to the site on 5th May 2009