Alcatel-Lucent's Q4 profit fails to erase full-year loss

IDG News Service - Alcatel-Lucent made a small profit in the fourth quarter, despite weaker-than-expected revenue, but remained in the red for the full year, it reported Thursday.

For the year ahead, the company is optimistic, seeing growth in demand for mobile Internet access as a driver for a new generation of networks based on the LTE (Long Term Evolution) equipment it builds. On Wednesday it announced that it will help AT&T Wireless upgrade its network in the U.S.; it already supplies Verizon Wireless with LTE equipment.

The company reported fourth-quarter revenue of €3.97 billion (US$5.69 billion as of Dec. 31, 2009 the last day of the period reported), down 19.9 percent on a year earlier. Revenue for the full year totalled €15.16 billion, down 10.8 percent.

Exceptional items totalling €201 million carried the company to a net profit of €46 million in the fourth quarter, insufficient to erase the full-year net loss of €524 million. The previous year's figures, net losses of €3.89 billion for the quarter and €5.22 billion for the full year, were dragged down by goodwill impairment charges of €3.9 billion in the fourth quarter of 2008.

The company's largest business segment, carrier networks, saw fourth-quarter sales slip 28.3 percent to €2.24 billion. Hardest hit was the company's wireless networks division, with sales down 33.7 percent to €799 million, where demand for LTE is not yet sufficient to counteract the continuing fall in sales of the older GSM (Global System for Mobile Communications) technology. Sales of optical networks also fell, down 19.5 percent to €763 million.

Sales in the services business segment remained stable at around €1.03 billion for the quarter, although profitability improved.

The applications software segment saw fourth-quarter revenue grow by 1.5 percent, to €334 million, with strong growth in digital media and advertising, and in payment systems as European network operators upgrade their systems to cope with the increased demand for data services generated by rising smartphone usage.

Enterprise networks, the company's smallest business segment, saw revenue shrink 11 percent, to €283 million for the quarter.

Alcatel-Lucent sees signs that the telecommunications equipment market is stabilizing and set to recover this year, perhaps growing by as much as 5 percent.

After cutting its annual costs by around €1 billion in 2009, the company expects to improve its operating margins this year. How much those margins will grow, though, depends to a large extent on competitive pressures. For 2010, it is aiming for an adjusted operating margin of between 1 percent and 5 percent, and in 2011, between 5 percent and 9 percent.