Alcatel-Lucent slashes net loss in 2014, faces diminishing returns from Shift Plan

Alcatel-Lucent's Shift Plan restructuring program may have peaked in terms of its effectiveness to deliver cost savings an analyst warned, as the company revealed fourth-quarter and full-year 2014 earnings that were below consensus estimates.

The infrastructure provider slashed its full-year net loss from €1.2 billion ($1.3 billion) in 2013 to €83 million in 2014, as a lower cost of sales helped the company to maximise the value of its revenues, despite the figure dipping from €13.8 billion in 2013 to €13.2 billion in 2014.

Revenues in 2014 fell throughout Alcatel-Lucent's European markets, which it segments into France, other Western Europe, and Rest of Europe. Sales income also fell in the U.S. and rest of the Americas, but grew in China and other Asia Pacific markets, and were also up in what the company terms the Rest of World.

Fourth-quarter figures will give Alcatel-Lucent confidence that the Shift Plan is on track. The company generated a net income of €290 million, overturning a €4 million loss in Q314 and well ahead of the €156 million profit earned in Q413. Revenues in the final three months of 2014 grew from €3.25 million in the third quarter to €3.68 million in the final three months, though the figure is down slightly on the €3.76 billion earned in Q413.

While CEO Michel Combes said Alcatel-Lucent's earnings "underline the success of our turnaround," Exane BNP Paribas analyst Alexander Peterc warned that the company's figures point to a slowdown in the momentum generated by the Shift Plan, Bloomberg reported.

The news agency added that Alcatel-Lucent's fourth-quarter operating profit of €284 million was some €20 million below analysts' expectations.

Meanwhile, Reuters reported that Alcatel-Lucent's Q414 revenues fell below consensus estimates gathered by Thompson Reuters, which tipped the figure at €3.69 billion.

The company is entering the final year of its three-year Shift Plan. Combes noted the program helped Alcatel-Lucent to improve underlying profitability and solidify the company. "Entering 2015, we are in a strong position to capitalise on profitable growth opportunities and will focus on operational excellence and quality of service."

Combes signed off by stating he is confident the company "will reach our positive free cash flow target in 2015."

For more:
- view Alcatel-Lucent's earnings statement [PDF]
- see this Bloomberg report
- read this Reuters article

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