Alcatel reports strong sales, wins two big contracts

4th November 2010, Comments 0 comments

Telecommunications equipment maker Alcatel-Lucent, scarred by several years of setbacks, reported on Thursday a return to profit and a strong rise in sales and announced two contracts worth more than five billion dollars.

The French-US company said adjusted operating earnings in the third quarter came to 61 million euros (88 million dollars), or 1.5 percent of sales. Alcatel-Lucent had suffered a loss of 11 million euros in third quarter of 2009.

The performance this year was short of expectations from analysts polled by Dow Jones Newswires, who foresaw an adjusted operating profit of 98.5 million euros.

Adjusted or underlying gross profit came to 1.377 billion euros, or 33.8 percent of revenues, a result which appeared to have attracted the attention of investors, according to analysts at Spanish bank Santander who had expected a margin of 36.4 percent.

"It could be seen as a sign that Alcatel-Lucent is doing less in terms of cost reduction and that new sector activities are not that profitable," said Carlos Trevino Peinador of Santander.

Shares in Alcatel-Lucent fell hard on the Paris exchange and were down 4.57 percent at 2.41 euros on an overall market that was up 1.88 percent.

Sales in the July-September period surged 10.5 percent to 4.074 billion euros, beating forecasts for turnover of 3.85 billion euros.

Company chief executive Ben Verwaayen in a telephone conference hailed "a return to growth at a faster pace than that of the market."

In an earlier statement he said the company anticipated "a significant sequential increase in our tip line in the fourth quarter."

"This, combined with our actions on costs, will lead to a strong leverage effect at the operating profit level. We maintain our full year outlook."

The group foresees an adjusted operating margin this year of between 1.0 and 5.0 percent of sales.

"While our supply chain is still experiencing capacity constraints, the demand for telecommunications equipment and related services is recovering due to booming data traffic and the need to increase network efficiency," the company said.

Alcatel-Lucent struggled to find its way after its formation in 2006 in a merger of the French group Alctael and US-based Lucent Technologies. After restructuring and the elimination of thousands of jobs, it reported its first net profit following the merger in July 2009.

The group also announced two big contracts on Thursday, notably a four-year deal worth 4.0 billion dollars to provide US mobile phone operator Verizon with a fourth generation network and the extension of its third generation network.

The company later announced that it had also won a contract worth 1.67 billion dollars to supply equipment to three Chinese groups, China Mobile, China Telecom and China Unicom.

The announcement came on the first day of a planned visit to France of Chinese President Hu Jintao.

© 2010 AFP

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