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Alcatel-Lucent Revenue Declines, CEO and Chairman Leave

Currency fluctuations dragged Alcatel-Lucent's second-quarter revenue down 5.2 percent year on year, while its net loss doubled due to exceptional charges, it reported Tuesday. The company also announced the resignation of its CEO and Chairman.

Alcatel-Lucent reported revenue of €4.1 billion (US$6.47 billion) for the quarter ended June 30, slightly higher than analysts' expectations. That's a decline of 5.2 percent year on year -- although if exchange rates had remained constant, revenue would have increased by 1.7 percent. Around half of Alcatel-Lucent's revenue is in U.S. dollars or closely linked currencies.

The company's net loss almost doubled to €1.1 billion from the €586 million reported a year earlier, inflated by exceptional charges of €880 million. Excluding such exceptional charges, the company made a net loss of €222 million, compared to an adjusted net loss of €336 million a year earlier.

Performance was not the reason for the resignation of Chairman Serge Tchuruk and CEO Patricia Russo, the company said. Rather, with the merger now complete, the company needs new management with a new strategy for growth, Tchuruk said in a statement.

He will quit on Oct. 1, while Russo will leave at the end of the year, or sooner if the board finds a replacement.

Looking ahead, Alcatel-Lucent expects third-quarter revenue to decline compared to the second quarter, followed by a strong rise towards the end of the year, as the telecommunications infrastructure market remains broadly flat.

The company is keeping a wary eye on the capital expenditure plans of European fixed-line carriers, which it fears could be hurt by the global economic slowdown.

Revenue from carrier networking equipment, the bulk of Alcatel-Lucent's business, dropped 9.4 percent year on year to €2.8 billion. CDMA (code division multiple access) cellular infrastructure revenue dropped more sharply than the Alcatel-Lucent expected when a key North American customer cut its spending. The company took a goodwill impairment charge of €810 million as a result. Fixed-line equipment revenue continued its decline, with DSL (digital subscriber line) shipments down in volume by 20 percent. Increased demand for the next generation of broadband access technology, FTTH (fiber-to-the-home) only partly compensated for the reduction in DSL revenue.

There were brighter areas, with double-digit revenue growth from other network infrastructure, including GSM (Global System for Mobile Communications), W-CDMA (wideband CDMA) and WiMax.

Services revenue rose faster than expected, up 9.1 percent to €818 million, with strong demand for network operations and network integration services. The company landed managed services contracts with Sunrise in Switzerland and Reliance Communications in India during the quarter.

Alcatel-Lucent's smallest business segment, enterprise networks, saw revenue grow 2.7 percent to €386 million. Demand remained strong for voice and data networking equipment.

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