For the first quarter of 2010, Alcatel-Lucent (ALU) reported revenues of €3.24 billion ($4.18 billion) and loss per share of 23 euro-cents (-$0.31 per ADS) due to purchase accounting in relation to the Lucent business combination.
Quarterly revenues decreased 9.8% year over year and decreased 18.1% sequentially to €3.247 billion. By operating segments, Networks saw a double-digit decline in revenue, partly attributable to a shortage of components in supply chain. This has been particularly true in wireless access and terrestrial optics. Applications revenue declined 6.3% year over year with enterprise solutions & Genesys relatively stable. Services segment was more resilient with a 3.1% year-over-year decrease supported by managed services and multivendor maintenance.
Revenues for the IP division were €272 million, a decrease of 5.6% from the year-ago quarter, driven by the decline in MSWAN revenues due to continuing market contraction. Revenues for the Optics division were €567 million, a decrease of 13.7% from the year ago quarter. Terrestrial optics declined at a high-teen rate.
Revenues for the Wireless division were €819 million, a decrease of 10.5% from the year ago quarter. The WCDMA segment witnessed a strong growth year-over-year and sequentially driven primarily by the North American market, and the 3G CDMA (EVDO) segment experienced a sustained demand due to data traffic growth driven by the increased market penetration of smart-phones.
Revenues for the Wireline division were €298 million, a decrease of 24.2% from the year ago quarter.
Network applications revenue declined in the mid teens mainly as a result of decisions taken in 2009 to refocus the company’s product portfolio. In focus areas, applications professional services (software customization), remote customer management (Motive) and maintenance all combined continued to enjoy strong growth. Enterprise applications saw stabilization this quarter: voice telephony was impacted by weakness in corporate investment in Europe.
Managed & Outsourcing Solutions revenues grew in the low teens this quarter, as it continued to benefit from the ramp-up of some of the large contracts won over the 2008/2009 period. The Network and System Integration (N&SI) business declined slightly this quarter affected by the activity in network design, integration and optimization, but at a lower pace than the prior quarter.
Net cash position at the end of the quarter was €512 million, versus €886 million as of Dec 31, 2009.
For 2010, Alcatel-Lucent continues to expect nominal growth (between 0% and 5%) for the telecommunications equipment and related services market.
Telecommunications companies continue to be the largest group in terms of mergers and acquisitions, which has helped ALU’s penetration as companies try and consolidate with a single vendor. There has been a trend of consolidating with one or two providers from the telecom industry to cut costs and simplify the purchasing process, and this has caused several mergers in the industry; Alcatel-Lucent is the largest by far. The creation of a clear #2 behind Ericsson in the market should help boost the competitiveness of the industry and give Alcatel-Lucent solid positioning to improve its position over the long term.
Based in Paris, Alcatel-Lucent is a diversified global manufacturer of telecom equipment with over 77,000 employees in 130 countries worldwide. Apart from being the world’s leading supplier of digital subscriber line (DSL) equipment, Alcatel-Lucent is among the leaders in telephone switching equipment, optical and data networking gear, mobile infrastructure, and communications software.
We currently have a Neutral recommendation on ALU.
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