Alcatel-Lucent yesterday (26 July 2012) announced a net loss of Euro 254m for the second quarter of 2012 results compared with a profit of Euro 43m in Q2 2011. The fall was considerably more compared with Q1 2012 when the company achieved a net income of Euro 398m.
The company warned on 17 July that is would post an adjusted operating loss for Q2 2012. It blamed competitive pricing in certain regions and a deteriorating world economic environment. Operating income showed a loss of Euro 86m (adjusted results – a loss of Euro 31m) compared with a profit of Euro 22m (adjusted figure – Euro 87m) in Q2 2011.
Revenues were up 10.6% quarter on quarter to Euro 3.5bn, but down 7.1% compared with the second quarter of 2011.
The company also launched ‘The Performance Program’, which is designed to achieve an additional Euro 750m cost reduction, bringing total savings to Euro 1.25bn by the end of 2013. Part of this will be achieved by shedding 5,000 jobs worldwide from its total workforce of 78,000 employees.
Other forms of remedial action include: exiting or restructuring unprofitable managed services contracts with associated headcount reduction; exiting or restructuring of unprofitable markets; and managing its patent portfolio as an independent profit centre.
Commenting on the results, Ben Verwaayen, CEO Alcatel-Lucent, said: ‘The second quarter performance confirms our strong positions in many attractive market segments including IP, Next-Generation Optics and Broadband Access, all of which are key investment areas that support our High Leverage Network Strategy.
‘However, despite having demonstrated our ability to deliver operational profitability, it is clear from the deteriorating macro environment and the competitive pricing environment in certain regions challenging profitability that we must embark on a more aggressive transformation. We are therefore launching today The Performance Program to accelerate our transformation and reduce costs by Euro 1.25 billion by the end of next year in order to keep ahead of market realities. These times demand firm actions.'
Verwaayen added that despite the cuts Alcatel-Lucent would continue to invest aggressively in core areas of critical infrastructure for mobile carriers in key regions around the world.
He said that the company had R&D spending constant while redeploying resources in support of its High Leverage Network Strategy, which now represents more than half of its Networks division’s revenues.
Geographically, North America remains the company’s largest region by revenue, but sales declined by 8.3% to Euro 1.3bn compared with Q2 2011. Europe’s economic woes hit the company – revenue dropped 15.6% to Euro 944m. The Asia-Pacific region dropped 4.8% to Euro 620m. One the Rest of the World showed growth of 11.7% to Euro 584m.
The divisional breakdown of revenue showed that sales in Networks decline 9.9% year-on-year to Euro 2.2bn, while operating income showed a loss of Euro 57m compared with a profit of Euro 48m a year ago.
Software, Services and Solutions slipped back 1.7% to Euro 1bn, while operating profit was up slightly by 1.9% to Euro 53m. The Enterprise division posted revenues of Euro 191m, down 1.5% and an operating income of Euro 3m, unchanged from a year ago.