Alcatel-Lucent reports first quarter loss
PARIS—Telecommunication equipment titan Alcatel-Lucent on Wednesday reported a fifth straight quarterly net loss and said it expected annual revenues to fall while scaling back its market forecast for 2008.
The Franco-American company said it lost euro181 million (US$282 million) compared with a loss of euro8 million a year earlier, when results were boosted by the sale of businesses to Thales SA.
Revenues were down slightly at euro3.86 billion ($6.02 billion) compared with euro3.88 billion a year earlier.
For the full year, Alcatel-Lucent said it expects revenue to decline 2-5 percent due to the weak dollar and lower spending by operators.
Nomura analyst Richard Windsor said the revenue decline puts margins under pressure. Sales need to grow for the company to approach the kind of profitability targeted when Alcatel SA of Paris and Lucent Technologies Inc. of Murray Hill, New Jersey, merged in 2006, he said.
Nonetheless, the company maintained its 2008 forecast of an adjusted operating margin in the mid single-digit range.
Investors disappointed with the results sent shares down 6.5 percent to euro4.2 ($6.5).
Everything in Alcatel-Lucent's first quarter report, apart from the gross margin, was negative, said WestLB analyst Thomas Langer.
Alcatel-Lucent predicts the global communications equipment and related services market in 2008 will be flat compared with its February expectation of "flat to slightly up" at a constant euro-dollar exchange rate. Chief Financial Officer Hubert de Pesquidoux, speaking in a conference call, blamed the worsening economic climate.
"While the long-term prospects for the industry are positive, the current macroeconomic environment remains uncertain, leading the company to continue to be prudent in its market assumptions," Alcatel-Lucent said in a statement.
The outlook compares with rival wireless equipment maker LM Ericsson of Sweden which reported results last week and is planning "for a flattish development in the mobile infrastructure market" in 2008, with "good growth" in the professional services market.
Alcatel-Lucent's quarterly net loss didn't come as a surprise. When it reported its 2007 earnings in February, the company predicted a first-quarter loss in 2008 because of a seasonal drop in revenue of 20 percent to 25 percent.
CEO Patricia Russo said revenue was in line with expectations and the company was making progress with its merger.
"We are taking the right actions to position the company to take advantage of the long-term growth potential we see in the industry driven by new subscribers, more broadband deployments and video and data traffic growth," she said in a statement.
The company is in the midst of a painful restructuring that foresees 12,500 job cuts.
Alcatel-Lucent said it cut 6,700 jobs in 2007, bringing the number of employees to 77,400.
Pesquidoux said an additional 1,200 jobs were shed in the first quarter.
When conceived, the Alcatel-Lucent merger was designed to boost margins through cost and research and development savings, while improving the joint company's pricing power with telecom operators, its largest customers. But intense competition in the industry means many of the savings have been used on discounts passed on to customers.
Alcatel Lucent's share price has plunged about 10 percent this year, after losing more than half its value in 2007, on the back of a string of profit warnings and concern over growth prospects for 2008.
