Alcatel-Lucent blames European order slump for Q1 loss

Alcatel-Lucent reported a first-quarter operating loss of €221 million and the company blamed the downturn in its fortunes in part on European companies withholding purchasing commitment.

"We had a slow start in a volatile environment because of lower product volumes and mix," CEO Ben Verwaayen told investors on an earnings conference call. "The European debt crisis is all around us and that has an impact. It's a serious issue to factor in and a good reason to be cautious."

The company said revenue in its network business clocked in at €1.98 billion, down 18 percent year-over-year. Within networks, the compnay's wireless unit saw a 29.5 per cent drop in year-over-year sales, down to €788 million.

Alcatel-Lucent has moved to reassure investors by confirming its profit targets and forecasting improvement for the future. However, the market expressed its disappointment by marking the company's shares down 13 per cent having previously managed four straight quarters in positive territory and after its first annual profit last year since it was formed in 2006.

"For Alcatel-Lucent, this is not a good start to the year: the economy is not helping them, especially in Europe," Pierre Ferragu, an analyst at Bernstein Research, told Reuters.

Analysts from Nomura and Barclays pointed out in research notes that Alcatel-Lucent's gross margin of 30.3 per cent was the lowest since the 2006 merger. Alcatel-Lucent CFO Paul Tufano said on the conference call that the first-quarter margins would be "a low point of the year. We expect margin improvement in the second quarter and the second half."

Alcatel-Lucent shares have fallen around 30 per cent over the past six months, according to MarketWatch, mostly on concerns linked to the deteriorating economic environment in Europe and the United States, and in the absence of any information from the company on its cost-cutting programme.

For more:
- see this release
- see this Bloomberg article
- see this Reuters article
- see this MarketWatch article

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