Alcatel-Lucent Losses Grow as Revenue Shrinks

Alcatel-Lucent reported a 6.9 percent drop in first-quarter revenue compared to last year, while losses more than doubled.

Revenue fell to €3.60 billion (US$4.82 billion) for the first quarter, from €3.86 billion a year earlier, while the net loss grew to €402 million from €181 million in the first quarter last year.

Excluding exceptional items related to Alcatel's 2006 acquisition of Lucent Technologies, the increase in the net loss was more dramatic, widening to €358 million from €95 million a year earlier.

The company is relatively optimistic about the future: it expects operating results to break even for the full year, adjusted for exceptional items, despite reporting an adjusted operating loss of €254 million for the first quarter, down from an adjusted operating profit of €36 million in the same quarter last year.

The biggest fall in revenue came in equipment sales to carriers, down 14 percent to €2.22 billion. Within that figure, sales of IP (Internet Protocol) products, including MPLS (multiprotocol label-switching) routers, rose 4.7 percent to €287 million but sales of legacy wireline telecommunications products including DSL access equipment fell 28.4 percent to €394 million.

Application software sales rose 13.3 percent to €255 million, boosted by multimedia products for carriers, and services revenue jumped 20.6 percent to €797 million.

Alcatel-Lucent's sales were hardest hit in North America, where they fell 16.9 percent to €1.11 billion. Sales dipped 2.5 percent in Europe, to €1.25 billion, and 2.8 percent in Asia-Pacific, to €649 million.

The company is moving slowly ahead with its cost-cutting plan, which it hopes will reduce annual operating expenses by €750 million by the end of this year. It has laid off 290 managers, and plans to lay off 710 more. However, of the 5,000 contractor positions the company plans to cut, it has only eliminated 770 so far.

The company hopes to further cut human resources, finance and IT management costs by working with other companies to develop and sell new products targeting the convergence of IT and telecommunications. It said it is in active discussions with "potential co-sourcing partners" to achieve this.

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