Alcatel-Lucent (ALU) reported net earnings from continuing operations of EUR0.14 per share (19 cents per ADS) for the first quarter, compared to the Zacks Consensus of $0.00. However, earnings include a net capital gain EUR659 million on the disposal of Genesys.
Total Revenue
In the first quarter of 2012, Alcatel-Lucent posted revenues EUR3.2 billion ($4.2 billion), which declined 12.3% year over year and 22.7% sequentially. The decline in sales was primarily due to double digit declines across its segments.
Geographically, North America experienced a double digit decline in revenue year over year, while Central and Latin America reported double digit growth rates. Europe and Asia Pacific performed reasonable well.
Segmental Performance
Revenues for the Network segment declined 18.1% to EUR1.9 billion and contracted 20.0% sequentially. Four of the five sub-segments posted a year over year double-digit decline. Optics and Wireless divisions were particularly weak during the reported quarter. However, at constant currency exchange rates, Networks revenue decreased 20.5% year-over-year and 21.8% sequentially.
Revenues at the S3 segment (Software, Services and Solutions) were almost flat year over year, declining marginally by 0.6% to EUR969 million. During the quarter, the division’s Services business and applications business reported lower revenues. At constant currency, S3 revenues decreased 3.1% year over year and decreased 27.8% sequentially.
Revenues in the Enterprise business declined 8.7% to EUR178 million in the first quarter 2011 compared to the year-ago quarter, and decreased 17.7% sequentially. At constant currency exchange rates, revenues at the Enterprise business segment declined 9.7% year over year and contracted 17.7% sequentially.
The decline in revenues was primarily due to declines in voice telephony because of the difficult economic environment in Europe. The data networking business also saw minor declines during the reported quarter due to slowdowns in certain services.
Income & Expenses
Gross margin for the first quarter declined to 30.3% compared to 35.3% in the year ago quarter and 34.4% sequentially. The year-over-year decline was attributable to a lower mix driven by the decline in CDMA revenues, unfavorable mix in Services and overall lower volumes. The sequential decline was due to significant lower volumes and unfavorable mix in Services.
During the reported quarter, the company reported an operating loss of EUR221 million or (6.9% of revenues).
Balance Sheet & Cash Flows
The company exited the year with EUR31 million in debt and an operating cash flow of EUR168 million.
Conclusion
Overall, first quarter results were primarily impacted by the softness across its business segments. However, moving forward, the company intends to leverage on its major next generation network roll-outs worldwide with particular emphasis on North America and China. Furthermore, on the basis of its innovation pipeline and major product launches, the company seems positive about its performance for the year ahead.
Alcatel currently holds a Zacks Rank # 3 which implies short term ‘Hold’ rating on the stock.
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