Alcatel-Lucent cuts losses by almost 80% in Q1

Alcatel-Lucent continued to show an improvement in its operating performance after the equipment manufacturer reported  its group net loss fell by almost 80 per cent to €73 million ($101 million) in the first quarter of 2014, from €353 million a year previously.

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Michel Combes, CEO of Alcatel-Lucent

The company, which has been pursuing a restructuring plan unveiled by CEO Michel Combes in June 2013, attributed the improvement to lower costs and the trimming of unprofitable contracts. The company reduced fixed costs by €143 million, and said this brings cumulative savings to €478 million under The Shift Plan when combined with €335 million of savings in 2013.

Alcatel-Lucent also reported a swing into the black for its operating income, which improved to €33 million from a pro forma loss of €179 million in the first quarter of 2013.

"We began 2014 as we ended 2013--totally focused on driving implementation of The Shift Plan," said Combes. "Having put the group in the right financial direction last year we are encouraged by the continued progress shown in the first quarter of 2014."

First-quarter revenue reached €2.96 billion, which was 0.3 per cent down compared to the first quarter of 2013 excluding the enterprise division. Alcatel-Lucent Enterprise is to be sold this year to China Huaxin subject to conditions, including regulatory approval. The group also closed the sale of LGS on March 31, and deconsolidated the unit from April 1, 2014.

The company added that revenue was up by 3.9 per cent over the year if managed services were excluded: this segment decreased by half to €99 million due to the strategy of terminating or restructuring loss-making contracts. Meanwhile core-networking revenues grew by 6.9 per cent in the first quarter of 2014 compared to the year-ago period, largely driven by 16 per cent growth in IP routing.

Wireless Access revenues were €999 million, an increase of 2.3 per cent year-on-year. The company said it continued to experience strong growth in LTE deployments, notably in the U.S. This growth was partially offset by continued declines in 2G and 3G technologies, which represented less than 25 per cent of its wireless access revenues in the first quarter.

"These results suggest that the ongoing turnaround at Alcatel-Lucent continues to gain steam, with both profitability and cash flow expected to improve strongly this year," analysts at Liberum said in a note, Reuters reported.

Combes added that the objective remains to bring the group as a whole back to positive free cash flow by 2015.

CFO Jean Raby also reiterated the company's earlier target of €1 billion of divestments by the end of 2015, Reuters reported.

In June 2013, Combes said the key objectives were to reduce fixed costs by €1 billion, cut another €1 billion in costs mainly through asset sales, reduce debt by €2 billion from the current level of €5.6 billion, and redefine a further €2 billion of debt that is close to maturity. The company also unveiled plans later in 2013 to cut 10,000 jobs by 2015.

In February, Alcatel-Lucent reported its first quarterly profit in two years after it moved back into the black in the final three months of 2013. Net income in the fourth quarter of €134 million overturned a €1.5 billion loss in the same quarter of 2012, while the vendor's full-year loss fell from €2 billion in 2012 to €1.3 billion in 2013.

For more:
- see the Alcatel-Lucent results for Q1 2014
- see this Reuters article

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