Alacatel-Lucent Loss Increases


By Dial Zero>
April 30, 2008

Telecommunications-equipment maker Alcatel-Lucent said Wednesday it expects revenue to fall 2% to 5% in 2008 due to the weak dollar and potential lower spending by operators, as the company reported a wider net loss in the first quarter. For the quarter ended March 31, the company reported a net loss of $282 million, compared with an $12.45 million loss a year earlier when there was a capital gain from a sale.

Revenue dropped slightly to about $6 billion, hurt by the dollar’s weakness against the euro. More than half of Alcatel-Lucent’s revenue is generated in dollars or dollar-denominated currencies, but the company reports in euros, so the dollar’s weakness against the euro translates into lower revenue figures.

The company said it expects revenue to fall in 2008 “due primarily to the significant deterioration in the [euro-dollar] exchange rate and, to a much lesser extent, the potential for lower capital spending by a few customers.”

Alcatel-Lucent wrestled with internal and external problems last year, its first full year as a merged company. Sluggish spending on network gear from operators and fierce price competition from rivals dragged down revenue as management struggled to mesh staff and product lines.

The company maintained its 2008 forecast of an adjusted operating margin in the mid single-digit range and said it expects an adjusted gross operating margin “in the mid thirties.” Revenue is expected to increase sequentially in the second quarter by 4% to 6%, below the former Alcatel’s historical growth rate of 5% to 10%, Pesquidoux said.

The company was more cautious about growth for the overall telecom-equipment and services market in 2008, saying it should be flat, compared with a previous forecast of “flat to slightly up.”

Excluding the capital gain, operating profit was barely better than expectations, said WestLB analyst Thomas Langer, who has a “reduce” rating on Alcatel-Lucent stock. Langer said the only positive number in the report was the gross margin, which rose to 36.2% from 34.4% a year earlier.

The news wiped out the majority of recent gains made by Alcatel-Lucent shares on better-than-expected results Friday from Swedish rival Telefon AB LM Ericsson. Shares of Alcatel-Lucent shares fell 7.4% in Wednesday morning trading on a slightly lower Paris market. Having tumbled 55% during 2007 on a string of profit warnings, Alcatel-Lucent’s share price had slipped about 9% between the start of the year and Wednesday’s results.