Alcatel revenues lifted by U.S. as cost cuts start

Reuters News
Posted: Oct 31, 2013 3:06 AM
Alcatel revenues lifted by U.S. as cost cuts start

By Leila Abboud

PARIS (Reuters) - Telecom equipment maker Alcatel-Lucent posted higher revenues in the third quarter helped by double-digit growth in the highly profitable U.S. market as it raced to cut costs to try to end six straight quarters of losses.

Alcatel-Lucent Chief Executive Michel Combes, who took the helm in April after heading Vodafone Europe from 2008 to 2012, is seeking to streamline the group to focus on high-speed mobile and fixed broadband products, while slashing the staff by 10,000 to save 1 billion euros by 2015.

Revenue in the third quarter rose 7 percent on a constant currency basis and 1.9 percent on a reported basis to reach 3.67 billion euros ($5.05 billion).

The group posted a net loss of 200 million euros, and had a gross margin of 32.6 percent, an improvement from 27.8 percent a year ago.

The margin improvement came from selling higher-margin IP networking routers and fixed broadband products, which help telecom operators carry mobile data traffic, as well as the effect of cost cuts.

Analysts had expected third-quarter revenue of 3.6 billion euros and a net loss of 139.4 million, according to Thomson Reuters I/B/E/S.

Sales in Asia slumped 10 percent in the quarter, while Europe eked out 3 percent growth, the company said on Thursday.

The group's IP products grew by 7 percent in the quarter to 580 million euros.

The French-American group said it consumed 218 million euros of cash in the quarter.

The results follow weak quarters at Sweden's Ericsson and Nokia's NSN equipment unit, which were hit by slower spending by operators finishing superfast mobile buildouts, known as 4G, in North America and Asia.

But investors cheered a bullish year-end forecast for NSN, sending its shares higher.

Alcatel too said that its business would end on a high note with "strong seasonal activity" in the fourth quarter. Cost cutting is also ahead of schedule and would be higher than the 250-300 million euros it had promised earlier.

"We are seeing the first positive signs of our new operating model," said Combes of the turnaround plan that began six months ago.

(Editing by James Regan and David Cowell)