Alcatel-Lucent (NYSE: ALU) sharply cut its losses in the first quarter and its adjusted operating income beat analyst expectations, but sales dipped year-over-year in the United States, its largest market by far.
Overall, the company reported a net loss of $101 million, down nearly 80 percent from a net loss of $486.2 million in the year-ago period. The company's adjusted operating income of around $45.5 million was ahead of analysts' expectations for a roughly break-even figure, according to the Wall Street Journal, after a $246.5 million adjusted operating loss in the year-ago quarter.
The company's total sales slipped in the first quarter by 3.3 percent to $4.07 billion, partially due to declines in the company's managed-services unit, which has been exiting unprofitable contracts. The vendor's "Access" unit, which includes its wireless business, saw its revenue fall slightly to around $2.17 billion.
In the United States, Alcatel-Lucent's largest region by revenue, sales fell to $1.89 billion in the first quarter from $1.98 billion in the year-ago period. Interestingly, the company noted that "a few large telecommunications service providers account for a significant portion of our revenues." In the first quarter of 2014, Verizon (NYSE: VZ), AT&T (NYSE: T) and Sprint (NYSE: S) represented respectively 17 percent, 14 percent and 8 percent of the company's revenues. That compares to 13 percent, 11 percent and 11 percent, respectively, in the first quarter of 2013. Alcatel-Lucent is a key vendor for each of the carrier's LTE networks.
Alcatel-Lucent CEO Michel Combes, as part of his "Shift" restructuring plan, has vowed to slash expenses by around $1.38 billion by 2015 and to sell another $1.38 billion in assets. So far he has cut costs by around $658.4 million and divested more than $482 million worth of assets.
"Net income was negative because of non-recurring elements like financial and pension costs, as well as restructuring costs," CFO Jean Raby said in a Bloomberg TV interview. "The first quarter shows another milestone: we're nearly halfway on our cost-cutting plan, and we still have about 18 months to go."
According to the Journal, Raby added on a conference call with reporters: "You could say much has been done. But much remains to be done. Why are we still negative at level of net income? It is the weight of history."
Alcatel-Lucent has struggled to turn a regular profit since it was formed in 2006, largely because of its small scale relative to the likes of Ericsson (NASDAQ: ERIC) and Huawei. In February, for example, the company reported its first quarterly profit in two years. Alcatel-Lucent has followed the path of Nokia (NYSE:NOK) in slimming down its networks business and trying to become more of a specialist focused on IP networking, LTE and small cells.
"Sales are short of what we were expecting, but profitability is improving substantially," Eric Beaudet, an analyst at Natixis, wrote in a note to clients, according to Bloomberg. "This comforts us in the company's ability to reach its 2015 targets."
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