Alcatel-Lucent Revenue Decline Continues in Q2

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Alcatel-Lucent reported second-quarter revenue down 4.8 percent year on year, but still expects to break even for the full year, excluding costs related to the three-year-old merger between Lucent Technologies and Alcatel. Among the signs of hope are an 8.5 percent increase in revenue compared to the first quarter, the company reported Thursday.

Revenue for the quarter totalled €3.9 billion (US$5.5 billion as of June 30, the last day of the period reported), down from €4.1 billion a year earlier.

The company is evaluating plans to sell other noncore assets following its sale during the quarter of a 21 percent stake in aerospace and defense group Thales to Dassault Aviation for €1.6 billion.

Alcatel-Lucent reported net income of €14 million, but that sum included one-time gains from the Thales sale and from the sale of its satellite business to Thales, and charges related to the Lucent acquisition. Excluding the €277 million after-tax effect of those transactions, the company would have made a €263 million loss. Comparisons with the year-earlier quarter are also complicated by one-time charges. In the second quarter of 2008, Alcatel-Lucent reported a net loss almost of €1.1 billion, inflated by exceptional charges of €880 million. Excluding the effect of those charges, the company made a net loss of €222 million.

Nevertheless, CEO Ben Verwaayen said he was pleased with the progress made in the year since he took charge of the company.

Alcatel-Lucent's potential market will shrink by between 8 percent and 12 percent this year, it said, but by cutting costs it hopes to break even, excluding ongoing charges associated with the Lucent acquisition.

The company has achieved 35 percent of its plan to cut annual running costs by €750 million, it said, pointing to measures including a ten-year IT outsourcing deal with Hewlett-Packard. To further cut costs, the company is considering similar deals for what it describes as "legacy research and development," or outsourcing the ongoing development and maintenance of some older product lines.

While overall sales are down, hit by a 10.3 percent decline in sales in the company's biggest market segment, carrier equipment, and a 15.7 percent drop in the company's enterprise networking division, there were some bright spots. Sales of application software for conference calling, rich media and online advertising rose 3.2 percent to €260 million, while service revenue rose 7.9 percent to €873 million.

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