Alcatel-Lucent (NASDAQ:ALU) posted a wider first-quarter operating loss and warned of uncertainty in the North American and European markets. The infrastructure vendor reported steep drops in revenue from its networks business and wireless in particular.
In the first quarter, the company reported a net profit of $526 million, up from a $13.2 million net loss in the year-ago period. Alcatel-Lucent benefited though from its $871 million sale of its conferencing center business Genesys to Permira last year. Alcatel-Lucent reported an operating loss of $292 million after reporting an operating profit of $5.3 million in the year-ago quarter.
"We had a slow start in a volatile environment because of lower product volumes and mix," CEO Ben Verwaayen said on the company's earnings conference call, according to Reuters. "The European debt crisis is all around us and that has an impact. It's a serious issue to factor in and a good reason to be cautious."
Overall sales were down 12 percent to $4.24 billion, down from $4.83 billion in the first quarter of 2011. The company's closely watched gross margin dropped to 30.3 percent, its lowest since the merger of Alcatel and Lucent Technologies in 2006, and down from 35.3 percent a year earlier and 34.4 percent in the fourth quarter. The company blamed the year-over-year decline in gross margin on lower sales, especially in CDMA and services. First-quarter margins would be "a low point of the year," CFO Paul Tufano said on the call, according to Bloomberg. "We expect margin improvement in the second quarter and the second half."
Alcatel-Lucent said sales in its network business fell 18 percent to $2.62 billion, and that sales in its wireless division plunged 29.5 percent from a year ago to $1.04 billion. "Given a tough year-over-year comparison for our wireless business, GSM was extremely weak in China due to central bidding phasing, while CDMA stabilized from Q4 levels," the company reported. "These trends were partially offset by double-digit growth in W-CDMA and LTE revenues which more than doubled compared to the year-ago quarter, and grew more than 50 percent sequentially."
The results are somewhat in line with Alcatel-Lucent's larger rival, Ericsson (NASDAQ:ERIC), which on Wednesday reported an 18 percent drop in its revenue for its networks business and also a 40 percent decline in year-over-year CDMA sales. Alcatel-Lucent said the trend from CDMA to LTE is accelerating in North America.
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