Alcatel-Lucent lines up enterprise unit sale, moves back into the black

Alcatel-Lucent confirmed it is negotiating the sale of its enterprise business as it seeks to maintain progress in a streamlining programme that saw the company deliver its first quarterly profit in two years in the final three months of 2013.

The vendor revealed it has received a binding offer for Alcatel-Lucent Enterprise from technology investment firm China Huaxin that values the business at €268 million ($363 million), and said it could close the deal in the third quarter of 2014. Alcatel-Lucent would retain a 15 per cent stake in the enterprise business, and is currently discussing the divestment with unions.

Alcatel-Lucent agreed the sale of LGS Innovations--a division providing secure networking, satellite communications, VoIP, and optical routers to U.S. national security, defence, and research communities--for $200 million in late December, as it repositions itself as a provider of IP and cloud networks, and ultra-fast fixed and mobile broadband infrastructure.

The restructuring programme, named the Shift Plan, certainly seems to be bearing fruit. The vendor on Thursday reported its first quarterly profit in two years, and revealed it cut its full-year losses by nearly €700 million in 2013.

Net income in the fourth quarter of €134 million overturned a huge €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.

Alcatel-Lucent CEO Michel Combes said the figures show the company is on track to meet the 2015 goals of the Shift Plan. "We have repositioned our company as a specialist in IP and cloud networking, as well as in ultra-broadband access, and we are seeing strong commercial traction in these segments," he said. "We have strengthened our balance sheet through the success of financing actions taken to reduce and re-profile our debt."

Combes added, "overall we have made significant progress to improve competitiveness, both in terms of profitability and innovation."

Despite the improving financials, Alcatel-Lucent's board recommended it does not pay a shareholder dividend for 2013.

While North America and Europe remained Alcatel-Lucent's top two revenue-generating markets in the fourth quarter, Asia Pacific recorded the highest year-on-year growth, climbing 10.2 per cent compared to the same period in 2012.

Analysts said the results show Combes has had a positive impact on Alcatel-Lucent since taking the helm in April 2013. The vendor's return to profitability sparked a double-digit rise in its share price, although fourth-quarter revenue of €3.9 billion fell short of analyst predictions of €4.18 billion, Bloomberg reported.

For more:
- see Alcatel-Lucent's results announcement
- see this Bloomberg article
- see this release on the sale of LGS Innovations

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