Thursday, July 29, 2010

Alcatel-Lucent Sees Improving Market Conditions

Citing improved overall market conditions and growing traction for its products, Alcatel-Lucent reported quarterly revenues of Euro 3.813 billion, up 17.4% sequentially, and down 2.4% year-over-year. The company said it is preparing for a strong second half of the year, backed with a growing order book, and confirmed its financial outlook for the year.
The demand for telecommunications equipment and related services is recovering due to booming data traffic and the need to increase network efficiency, however Alcatel-Lucent noted that its supply chain is still experiencing capacity constraints. Adjusted operating income was Euro 28 million or 0.7% of revenue.

"I am pleased with the continuing progress in our transformation journey, illustrated in the second quarter both by the top line and profitability. Revenues for the quarter reflect the on-going and expected overall improvement in market conditions and the good traction of our product portfolio. This is notably highlighted by the good performance in IP and wireless and, from a geographic standpoint, by strong growth in North America. The quarter also saw strategic and major wins with our selection by the NBN Company as a supplier for the Australian nationwide superfast broadband network rollout and by the ACE consortium to deploy a submarine optical link between Europe and Africa. And I am proud to announce that Alcatel-Lucent has been selected by AT&T as one of its Domain Suppliers for IP/MPLS/EPC equipment," stated Ben Verwaayen, Alcatel-Lucent's CEO.

Some highlights:

  • Networks segment were Euro 2.304 billion, a decrease of 3.4% compared to Euro 2.384 billion in the year-ago quarter and an increase of 19.5% compared to Euro 1.928 billion in the first quarter 2010.

  • Revenues for the IP division were Euro 318 million, an increase of 11.2% from the year ago quarter, with near 30% growth from the year ago quarter in IP/MPLS service routers revenue reflecting continued strong momentum in North America and EMEA.

  • Alcatel-Lucent has been selected by AT&T as one of its Domain Suppliers for IP/MPLS/Ethernet/EPC equipment and consistent with that selection, the group has been awarded a multi-year project related to AT&T's cell site backhaul infrastructure.

  • Revenues for the Optics division were Euro 622 million, a decrease of 14.6% from the year ago quarter. However, the company said terrestrial optics witnessed significant sequential increase and declined year-over-year at a lower rate than in Q1 2010 driven by strong growth in the WDM segment associated with the success of a new platform and the growing market demand, particularly in North America and Asia Pacific.

  • Alcatel-Lucent's next-generation terrestrial optics portfolio, including packet optical and microwave products, continues to gain traction, with the first commercially available solution to carry a single carrier 100G signal using Next-Generation Coherent technology.

  • After sustained strong growth in 2009, the submarine business declined at a double digit rate as some large projects have been completed or are near completion, while recent contracts have not yet started generating revenues and decisions on some other expected projects have been delayed. New major contracts include undersea networks linking Africa and Europe, and the Canary Islands and Spain.

  • Revenues for the Wireless division were Euro 1.021 billion, an increase of 5.0% from the year ago quarter. The WCDMA business was the key driver of that increase with another quarter of near 50% year-over-year growth driven primarily by the North American market. A very strong sequential increase in the CDMA business reflected spending to accommodate data traffic growth on 3G CDMA (EV-DO) networks, and the year-over-year decline in our GSM business eased to a single digit rate. During the quarter, Alcatel-Lucent and China Mobile completed the first high-definition video call over a TD-LTE network at the Shanghai World Expo and was selected as the sole equipment provider for China Telecom's CDMA/EV-DO Rev. B network at the Expo 2010 in Shanghai.

  • Revenues for the Wireline division were Euro 366 million, a decrease of 13.7% from the year ago quarter. Although the wireline decrease reflects ongoing spending cuts on legacy technologies, including core switching and ADSL, Alcatel-Lucent is deploying new technologies, including VDSL2 and pair bonding, with carriers like AT&T to extend the reach of their existing copper access infrastructure. In next-generation fiber-based access, sales grew significantly and the company was selected as a strategic supplier for the rollout of Australia's National Broadband Network (NBN) and will provide GPON and Carrier Ethernet aggregation equipment, as well as engineering and integration services. Alcatel-Lucent was also selected by both China Mobile and China Telecom to deploy its PON-based solutions.

  • Applications revenues grew at a low single-digit rate with enterprise solutions & Genesys stable. Services revenues declined at a mid single digit rate.

  • From a geographic standpoint, traction was strong in North America with a double digit rate of growth and an improved trend in Rest of the World with a much smaller decline in revenues than in the first quarter. The sales decline in Europe remained in the high single digit range. Finally, Asia Pacific witnessed a double digit rate decline due to low activity in China, partly offset by significant growth in India.