After six years and more than $13 billion (€9.9 billion) in losses, the markets welcomed the news with a 14% jump in Alca-Lu’s share price last Friday (and continuing to rise slightly this week). But with operators forecast to cut back on infrastructure capex growth, increasing just 5.7% this year compared to a 29% last year according to ABI Research, it remains unclear if this is the turning point for Alcatel-Lucent or just another one-off quarter?
Alca-Lu moves in right direction
Is been a banner week for the French-American network gear vendor. Last Friday Alcatel-Lucent reported its first full-year profit ever, posting earnings of €1 billion for 2011 after a loss of €334 million the previous year. With revenue down 2% during the period, that's quite a turnaround involving some serious cost cutting.
While its wireless and fixed-line networks unit showed further weakness with income falling 64% year-on-year in 4Q, software and services was the standout business area with operating income surging 73.5% year-on-year. Its enterprise unit also showed strong growth, increasing 22% from 4Q10.
Chief executive Ben Verwaayen has vowed to continue on the cost-cutting warpath, trimming a further €500 million this year, to improve the company's operating margin.
The network equipment provider's results come just two weeks after Ericsson reported a 66% drop in its 4Q earnings, and NSN announced plans to cut 4,100 jobs in Germany and Finland as part of a global restructuring program that started last November.
The other big story this week was that Alcatel-Lucent claimed the No. 2 spot in the carrier router and switching market with a 19% share in 4Q, moving past Juniper (at 16.5%) – a feat it has managed in only twice in the last four years, according ACG Research. The research firm says Alcatel-Lucent posted gains in total carrier routing, ESER, MSER and Carrier Ethernet.
The company also maintained its No. 2 ranking in the global optical market, with a 16% share. The overall market, which was down in 2010, was up almost 10% last year, showing the strongest signs of growth since 2008.