Alcatel-Lucent (ALU) reported its fourth quarter and full-year 2010 earnings result. Fourth-quarter earnings per share were €0.13 (17 cents) compared with prior-year earnings per share of €0.02 (3 cents). The company outperformed the Zacks Consensus Estimate of 14 cents.
For full-year 2010, the company posted a loss per share of €0.15 (20 cents) compared with loss per share of €0.23 (32 cents). Loss per share for the year was below the Zacks Consensus Estimate of loss per share of 19 cents.
Total Revenue
Total revenue in the quarter was €4,862 million ($6,608.9 million) compared with €3,967 million ($5,863.8) in the prior-year quarter. On a constant currency basis, revenue surged 15.1% year over year in the quarter.
For full-year 2010, total revenue was €15,996 million ($21,225.1 million) compared with €15,157 million ($21,116.4 million) in 2009.
Segment Revenue
Networks revenue in the quarter increased 31.7% year over year (23.1% on a constant currency basis) to €2,952 million. Within the segment, IP division revenue was up 58.8%, Optics division revenue surged 6.8% and Wireless division revenue climbed 44.5%. Wireline division posted a positive growth of 22.6% after experiencing a decline of 13% in revenue. Sales of next generation products were up 72%
Applications revenue was €575 million, up 7.5% year over year. Within the segment, Network Applications revenue accelerated 8.2% and Enterprise Application revenue was up 4.1%.
Services revenue was €1,140 million, up 10.7% year over year
Income & Expenses
Gross margin in the quarter was 36.2%, down 50 basis points year over year, primarily due to the competition in the market, partially offset by increased volume, change in geographical and product mix and a reduction in fixed operation costs. However, gross margin was up 240 basis points sequentially.
Operating expenses in the quarter increased 9% year over year on a constant currency basis, primarily due to higher R&D expenditures related to new product developments. Operating profit was €394 million (8.1% of revenues).
Balance Sheet
Cash and cash equivalents and marketable securities were $5,689 million at the end of 2010 compared with $5,570 million at the end of 2009. Long-term debt was $4,112 million while total equity amounted to $4,205 million.
Operating Cash flow in the quarter was $702 million compared with $193 million in the prior quarter and $635 million in the prior-year quarter.
Outlook
The company is confident of delivering a change in its financial results driven by its revamped product portfolio, implementation of High Leverage Network and Application Enablement strategy, increased customer significance and improved operational excellence. These were highlighted by the solid revenue growth and strong margin performance in the fourth quarter.
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. The company has also been a big player in mobile handsets, fiber optic cable, and Internet routers. Major competitors of Alcatel-Lucent are Cisco Systems Inc. (CSCO) and LM Ericsson Telephone Co. (ERIC)
We currently maintain a Neutral rating for the long term on Alcatel-Lucent, with a Zacks #3 Rank (short-term Holdrecommendation) over the next one-to-three months.
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