Alcatel-Lucent snags $4B Verizon contract, posts Q3 profit

Alcatel-Lucent (NASDAQ:ALU) capped a strong third quarter by securing a $4 billion infrastructure deal with Verizon Wireless (NYSE:VZ).

The Franco-American equipment vendor swung back to a profit, marking its first profitable quarter this year. The firm reported a profit of $35.3 million, compared with a loss of $257 million in the year-ago period. The profit was aided by a one-time tax benefit related to pension plans, as well as higher sales. Alcatel-Lucent's total revenues clocked in at $5.75 billion, up 10.5 percent from $5.21 billion in the year-ago quarter. The company said it achieved double-digit growth in the North American market.

Alcatel-Lucent's four-year contract with Verizon is for Verizon's continuing 3G EVDO expansion as well as its LTE network buildout. Verizon plans to launch LTE in 38 markets this year and expects to fill out its 3G footprint with LTE by the end of 2013. The contract is for end-to-end CDMA and LTE radio network solutions; IP, optical and microwave backhaul and transport; and professional and network integration services.

In addition, Alca-Lu expects to sign $1.66 billion worth of deals with China Mobile, China Unicom and China Telecom. The deals will be signed when President Hu Jintao visits France tomorrow. "I think this is a significant turning point in the transformation of the company," Alcatel-Lucent CEO Ben Verwaayen told the New York Times. "We are experiencing good demand for our products."

However, Alcatel-Lucent continues to suffer from component shortages, something that has bedeviled the industry all year. "Component constraints are still there ... every quarter will be a little bit better, but it will take a couple of quarters to resolve," Verwaayen said, according to the Wall Street Journal. He said the company has invested heavily in inventory to continue to meet demand despite the shortages.

For the year, Alcatel-Lucent continues to expect growth of between 0 and 5 percent for the telecommunications equipment market. Alca-Lu also said it continues to expect to reach an adjusted operating margin of between 1 and 5 percent.

For more:
- see this earnings release
- see this Verizon release
- see this WSJ article (sub. req.)
- see this NYT article
- see this FierceWireless Q3 earnings page

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