Alca-Lu expects positive free cash flow in 2011

Alcatel-Lucent (NASDAQ:ALU) expects to achieve positive free cash flow in 2011, the company's CEO said, indicating the firm is making headway in its financial turnaround.

Speaking to the French newspaper Le Figaro, Alcatel-Lucent CEO Ben Verwaayen said the company expects to reach the financial milestone next year, and reiterated the company's targets for 2010. For the year, the company expects growth of between 0 and 5 percent for the telecommunications equipment market. Alca-Lu also continues to expect to reach an adjusted operating margin of between 1 and 5 percent, Verwaayen said.

The company's results this year have been hurt by an industrywide component shortage. Alcatel-Lucent reported a net loss of $240 million in the second quarter. However, the company also posted an adjusted operating profit of $36.4 million in the quarter, compared with a loss of $80.7 million in the second quarter of 2009. This number excludes items such as the cost of the merger between Alcatel and Lucent, and is often seen by analysts as a key measure of the firm's actual performance. The company has reported a net quarterly profit only twice since the 2006 merger.

The component shortage is a result of operators' cutting back spending on network equipment during the recession, leading electronics parts makers to reduce production. Now that spending has returned, suppliers have had trouble ramping up production. Verwaayen said production is increasing, and a balance between supply and demand will be achieved in 2011.

However, there are still signs that the component shortage is hurting industry players. AT&T (NYSE:T) Operations CEO John Stankey said last week that AT&T's wireless network upgrade efforts have been hampered by continuing parts shortages from key vendors. He said AT&T is currently dealing with $300 million worth of backlogged network equipment.

For more:
- see this Dow Jones Newswires article
- see this Reuters article

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