Alcatel-Lucent expects more uncertainty in 2008
PARIS -- Telecommunication equipment titan Alcatel-Lucent, with offices in Lisle and Naperville, sees global economic woes causing it uncertainty in 2008 after the newly merged company survived a choppy 2007. The company reported a fourth-quarter loss Friday and scrapped its dividend for last year.
The Franco-American company had some good news, however: Sales rose, and it swung to an operating profit in the fourth quarter.
Analysts said the results were slightly better than expected and the company's grim outlook reflects the difficult market overall.
Alcatel-Lucent reported a net loss of $3.76 billion in the quarter ending Dec. 31 and $5.12 billion for the year, as it booked $3.71 billion in write-downs in the quarter related to the reduced value of assets inherited from Lucent Technologies Inc.
Revenue for the fourth quarter rose to $7.61 billion, up 18 percent from the same period in 2006 and above analysts' forecasts.
Operating profit amounted to $441 million, compared to a loss of about $4 million a year earlier. Operating profit excludes one-time items such as restructuring costs and asset sales, but is often used as a yardstick for a company's basic business activity.
The fourth quarter normally sees strong revenues for telecommunications equipment makers, and the latest figures were up -- but from a disappointing total in the fourth quarter of 2006, during which Alcatel SA of Paris completed its acquisition of Lucent Technologies Inc. of Murray Hill, N.J.
Alcatel-Lucent suspended its dividend for 2007, citing uncertainty for this year.
"While the long-term prospects of our industry remain good, the macroeconomic environment has created uncertainty in our markets in the last few months," CEO Patricia Russo said in a statement.
The company predicted a first-quarter loss in 2008 because of a seasonal drop in revenue of 20 percent to 25 percent. Chief Financial Officer Hubert de Pesquidoux said he hoped the second quarter of 2008 would be better.
The company is in the midst of a restructuring that foresees 12,500 job cuts. Alcatel-Lucent said it cut 6,700 jobs in 2007.
Alcatel-Lucent is starting to show underlying restructuring is working despite a tough market, and investors should see improving fundamentals this year and next, Exane BNP Paribas analyst Alexander Peterc said in a research note.
Analyst Richard Windsor of Nomura said: "It looks to us like there is little or no delivery of savings to investors but rather to customers."
When it was conceived, the Alcatel-Lucent merger was designed to boost margins through cost and research and development savings, while improving the joint company's pricing power with telecom operators, its largest customers. But intense competition in the industry means many of the savings have been used on discounts passed on to customers.