Alcatel-Lucent narrows loss in Q3 but U.S. sales continue to drop off

Alcatel-Lucent (NYSE: ALU) reported a narrower net loss for the third quarter and an improved margin as cost cuts and a slower cash burn offset falling sales. However, in the company's crucial U.S. market, sales continued to fall in the period.

Overall, Alcatel-Lucent reported a net loss of $22.7 million (€18 million), compared to a net loss of  $252 million in the year-ago period. Total sales fell 5.9 percent in the quarter to around $4.1 billion, just slightly lower than the $4.2 billion analysts had predicted, according to Bloomberg. However, the vendor boosted its gross profit margin to 34 percent, a strong improvement from 31.9 percent a year earlier and better than the 32.2 percent analysts had expected, according to Reuters.

Revenues from the vendor's Wireless Access division came in at $1.48 billion, down 1.5 percent year-over-year, as LTE rollouts continued at a more moderate pace in the third quarter after strong investments by carriers in the first half of the year, notably in China and North America.

The company's higher margin and smaller loss indicate that CEO Michel Combes' restructuring program, dubbed the Shift Plan, is starting to reap results. The goal of the program is to return the company to being positive cash flow in 2015. Under the program, Alcatel-Lucent has focused on IP networking, broadband access, LTE and small cells, as well massive cutting of fixed costs and jobs.

"We improved profitability in most of our business lines," CFO Jean Raby said on the company's earnings conference call, according to Bloomberg. "It's thanks to a better mix, better products and a focus on profitable contracts."

Alcatel-Lucent reported a 22.5 percent increase in sales in Asia-Pacific, driven by LTE network rollouts in China as well as traction in other markets including Japan and Australia. However, sales in the U.S. in the quarter fell to around $1.62 billion from $1.95 billion a year ago.

"There was a decrease in the U.S. notably after very strong activity in the wireless area in the previous quarter," Raby said. "We expect the U.S. market to remain a robust and important market for us in the future."

The U.S. remains a crucial market for the company. In the first nine months of 2014, Verizon (NYSE: VZ), AT&T (NYSE: T) and Sprint (NYSE: S) represented respectively 14 percent, 12 percent and 9 percent of the vendor's revenues (compared to, respectively, 13 percent, 12 percent and 10 percent in the first nine months ended September 30, 2013).

For more:
- see this release
- see this report (PDF)
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article

Special Report: Wireless in the third quarter of 2014

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