Alcatel-Lucent continues improvement in profitability in Q3 2014

Net losses cut to just €18m compared with €200m a year ago, but revenue down 5.9% partly due to US mobile operators cuttingt back on LTE spending

Alcatel-Lucent continues improvement in profitability in Q3 2014

Alcatel-Lucent reported a continuing improvement in profitability in the third quarter of 2014. Net income showed a loss of €18m compared with a loss of €200m in Q3 2013 – an improvement of 182%.

In addition to operating income improvement, this is mainly explained by lower restructuring costs, a decrease in financial expenses compared to the year-ago quarter and post-retirement benefit plan amendments amounting to €103m.

Adjusted operating income increased to €170m or 5.2% of revenues, with year-to-date adjusted operating income improving €360m compared to the year-ago period

Group revenues, excluding Managed Services, were down 3.8% year-on-year (down 5.9% when included) to €3.2bn. Fixed costs savings of €73m were achieved in Q3 2014, bringing cumulative fixed cost savings to €645m, two-thirds of the target set by the company’s Shift Plan objective designed to return the company to full profitability.

Commenting on the third quarter results, Michel Combes, CEO of Alcatel-Lucent (pictured), said: “Since the launch of The Shift Plan, our primary objective is to enable the company to generate free cash flow on a sustainable, recurring basis, starting in 2015. Our third quarter results show that we are increasingly improving our underlying profitability, an important step towards this commitment.

“In parallel, we have opened the second chapter of The Shift Plan, sharpening our focus on applying innovation to unlock growth in order to address our strategic ambitions within and outside of the telecoms sector.”

From a geographic standpoint, North America revenues (excluding LGS) declined by 14.0% year-over-year to €1.4bn, mainly reflecting lower revenues in the Access segment and in legacy products in IP Transport.

In Europe, the substantial majority of the decrease in revenues is attributable to Managed Services; excluding such impact, revenues decreased 1.8% to €711m, with significant strength in IP Routing and IP Transport.

Asia Pacific posted a 22.5% year-over-year growth to reach €721m, driven by LTE network roll-outs in China as well as traction in other markets including Japan and Australia. In the rest of World, MEA declined at a low single-digit pace to €460m, while CALA showed slight growth. 

Core Networking segment revenues were €1.4bn in Q3 2014, down 3.9% compared with Q3 2013. Adjusted operating income reached €123m, or 8.5% of segment revenues in Q3 2014, an increase of 230 basis points compared to Q3 2013.

Access segment revenues were €1.8bn in Q3 2014, a 7.5% decrease compared with Q3 2013. In Q3 2014, segment operating income was €62mi, an improvement of €16m compared with Q3 2013. While Fixed Access continued to be a significant contributor in profitability, the year-over-year change reflected improvements in the Wireless and Managed Services division.

Wireless Access revenues were €1.17bn, a decrease of 1.5% year-on-year, as LTE rollouts continued at a more moderate pace in the third quarter, after accelerated investments in the first half of 2014, notably in China and North America. 

Managed Services revenues were €97m, decreasing by close to 50%, reflecting the company’s strategy to terminate or restructure loss-making contracts.


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