Alcatel-Lucent (NASDAQ:ALU) lowered its 2011 profit forecast and the company's third-quarter revenue came in lower than analysts' estimates as the vendor said operators were more hesitant to spend amid economic uncertainty, especially in Europe.
The company lowered its full-year 2011 operating margin forecast to 4 percent, 1 percent below its previous target, which sent the company's shares down as much as 11 percent. CEO Ben Verwaayen said the company "is not at a level we are satisfied with" and also said that amid economic uncertainty, especially with European markets reeling from the debt crisis there, fourth-quarter revenue would be lower than anticipated.
To cope with weaker sales, Verwaayen said Alcatel-Lucent will embark on a $691 million program of additional cost cuts in 2012, affecting both sales spending and project costs. "Given economic uncertainties, we will take more radical actions," he said, according to Reuters. "You will see us increase our efforts on cost control and cash flow."
Verwaayen said he is confident that the company' strategy of capitalizing on increased mobile broadband demand--and the attendant network upgrades--will pay off. Still, markets were rattled by the company's decision to cut its forecasts. "This is not just a weak quarter," Thomas Langer, an analyst a WestLB, told the Wall Street Journal. "The restructuring announcement shows that there may be more structural problems residing in Alcatel-Lucent."
For the third quarter Alcatel-Lucent posted a $268 million profit, up from $34.56 million in the year-ago period and higher than the consensus of $79 million, according to analysts surveyed by Bloomberg. However, the profit was boosted by a one-time tax gain. Total sales slumped 6.8 percent to $5.25 billion, missing the analyst consensus of $5.53 billion, according to Bloomberg.
Alcatel-Lucent said revenue for its wireless division clocked in at $1.42 billion, a decrease of 3.4 percent from the year-ago quarter. In a bit of bright news for the company, it said that growth continued in the Americas, led by its CDMA EV-DO and LTE businesses, both contributing to strong double-digit growth in the region. Sales in North America climbed 10 percent year-over-year, the company said.
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