Wireless
The net loss swelled to 402 million euros ($537.5 million) from 181 million euros a year earlier, making it Alcatel- Lucents 10th straight quarterly deficit, according to a statement today. That missed the median loss of 270.9 million euros, according to 10 analysts estimates compiled by Bloomberg. Revenue fell 6.9 percent to 3.6 billion euros. Alcatel-Lucent reiterated its goal of a break-even adjusted operating profit this year.
“2009 will be a year of transition,” Chief Executive Officer Ben Verwaayen said in the statement. “Our guidance for the year remains unchanged and we are taking appropriate actions.”
Verwaayen, who has been in charge since September, is reducing costs to end losses as demand falters. In December, Verwaayen said he would slash 2 billion euros of expenses over two years, including 1,000 more managerial positions, bringing job cuts to 17,500 since Alcatel SA bought Lucent Technologies Inc. in 2006. Paris-based Alcatel-Lucent has lost about 8 billion euros since the merger.
Alcatel-Lucents market value has tumbled more than 18 billion euros to 4.5 billion euros since the November 2006 completion of the merger, which was aimed at fighting off competitors including Ericsson AB and Huawei Technologies Co. The shares have risen 28 percent this year.
Shrinking Market
Competitor Ericsson, the worlds largest maker of wireless phone networks, last week said first-quarter profit declined 35 percent on costs to eliminate jobs. The Stockholm-based companys CEO, Carl-Henric Svanberg, said customers in some markets postponed spending and that some operators are “more cautious” with long-term investments.
The telecommunications equipment market will slump 8 percent to 12 percent in 2009 at constant exchange rates, Alcatel-Lucent said. The company suffered from writedowns in the wireless-equipment business, restructuring costs, spending cuts by clients including Sprint Nextel Corp. and competition from Ericsson and Huawei, Chinas biggest phone-network equipment maker.
Deutsche Telekom AG, Europes biggest phone company, said last month it is freezing 1 billion euros of capital expenditure as customers canceled fixed-line phones. TeliaSonera AB, Swedens largest phone company, said it may cut spending, while Telefonica SA and Vodafone Group Plc said in March they will share wireless network sites to save money.
Margin Goal
In December, Alcatel-Lucent said it aims for a gross margin in the mid-30s and an operating margin in the “mid-single digits” in 2010 by reducing costs by 1 billion euros in each of the next two years.
The company will post an adjusted operating profit in 2010, although its too soon to say when it will report net income, said Paul Tufano, hired in November as chief financial officer.
On Sept. 2, Alcatel-Lucents board named Verwaayen, previously head of BT Group Plc, as CEO and appointed Philippe Camus, co-managing partner of Lagardere SCA, as chairman. They replaced former Lucent CEO Patricia Russo and Alcatel Chairman Serge Tchuruk, the architects of the 2006 merger.
Verwaayen said Alcatel-Lucent had no plans to leave the business of making wireless-communications equipment. The company suffered as the wireless-network market shifted away from CDMA, a standard Alcatel-Lucent dominated, toward the global system for mobile communications, or GSM.