Alcatel-Lucent continued struggling with the fine points of its merger as the company Tuesday reported a net loss of 336 million Euros ($460.3 million) in its second quarter, including a 3.6% drop in revenue from 4.49 billion Euros in the previous year's quarter to 4.33 billion Euros. The firm had recorded a profit of 302 million Euros in the 2006 quarter.
CEO Patricia Russo found a bright side to the earnings, however, pointing out that Alcatel saw order flow momentum building and experienced strong growth in its Asia Pacific region.
"During the quarter, we reduced our cost structure, in areas such as IS/IT and R&D," she said in a statement. "Additionally, we reduced approximately 1,900 positions ... 30 % of the 3-year 12,500 target."
Russo, the former head of Lucent Technologies before it was acquired by France's Alcatel, reported the earnings from Paris. Lucent and Alcatel merged late last year.
"The gross margin was lower than we would have liked and was negatively impacted by continued significant investments in key markets, an unfavorable product and geographic mix, as well as some impact from product related transition costs as customers migrate their networks," she said. "We believe the gross margin level this quarter is not indicative of the business going forward."
The firm pointed to its recent contract valued at more than $400 million to expand the wireless network of India's Reliance Communications. The network, which will utilize both CDMA and GSM infrastructures, will cover more than 20,000 towns and 600,000 villages in India.
In the U.S., Alcatel signed an agreement with Verizon Communications to supply gear for advanced GPON-based FiOS services.
Revenues in Alcatel's wireless business group declined, dropping to 1.237 billion Euros from 1.396 billion Euros in the previous year's quarter. Wireless shipments in South East Asia and China improved, however.
The company reported that it has more than 70 WiMax trials underway worldwide.
"As we have said, 2007 is clearly a transition year for the company as we continue to execute on our integration plans in a rapidly changing industry," Russo said. "We are planning to achieve our synergy related pre-tax savings of 600 million Euros this year ... we are strategically reinvesting our gross margin savings."