Alcatel-Lucent Reports $19.7 Million Profit

The communications equipment supplier's stock rose on news of its first profit in more than two years.
The freefall in Alcatel-Lucent stock stopped Thursday as the firm reported a profit in its second quarter after nine consecutive quarters of losses.

Formed by a merger of Alcatel in France and Lucent Technologies in the United States, the company has sought to right itself after top management upheavals and massive employee layoffs. The quarter's net profit of $19.7 million was attributed largely to Alcatel-Lucent's sale of its stake in Thales. The company's stock was up nearly 10% in early trading Thursday.

Looking forward, Alcatel-Lucent's CEO Ben Verwaayen noted that market conditions are difficult, but he remained hopeful of achieving improved results in the second half of the year. "Operationally, we are seeing positive trends in our top-line, gross margin, and operating expenses," he said in a statement. "As we look forward to the second half, we expect to achieve our target of an adjusted operating income around breakeven through further improvement in our margins and expense structure."

While the company noted it expects its "addressable market" to decline between 8% and 12% in 2009, Alcatel-Lucent is looking for growth in some areas. It pointed to its recent co-sourcing partnership with HP as a bright spot, because it is expected to improve Alcatel-Lucent's IT infrastructure. The company said it is "exploring" other co-sourcing partnerships.

Like other communications equipment suppliers, Alcatel-Lucent is suffering from a decline in wireline-related sales, but the company's wireless units are holding up well, the company said. Alcatel-Lucent said there is sustained growth in its W-CDMA business and its CDMA revenue has recovered. GSM revenue is rapidly declining, the company added, but an uptick in orders from China for CDMA EV-DO products is a positive sign.

"Finally," the company said, "the momentum in LTE continues to build up with several operators selecting Alcatel-Lucent for their trials this quarter."

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