Alcatel-Lucent net loss widens in Q1

[May 05, 2009]  PARIS (AP) -- Alcatel-Lucent's net loss widened in the first quarter as sales of both wireless and wireline communications gear continued to fall in all major global markets amid the global economic downturn.

The world's third-largest supplier of wireless networking gear for telecom operators and companies blamed tough market conditions and continued restructuring for the shortfall -- its ninth consecutive quarterly loss since Alcatel-Lucent was created in 2006.

The Paris-based company reported a net loss for the January to March quarter of euro402 million ($531.56 million), compared with a euro181 million loss a year earlier.

The company has now piled up around euro9 billion in losses over the last nine quarters. The company doesn't expect to make a full-year profit until 2011, five years after Alcatel SA's purchase of Murray Hill, New Jersey-based Lucent Technologies Inc. for $11.4 billion in 2006.

Sales fell 6.9 percent in the first quarter to euro3.6 billion, following a steep drop in sales of wireless equipment to North American operators.

In a statement, the company said it still expects the global market for telecommunications equipment and services to contract between 8 percent and 12 percent this year compared with 2008. That's in line with the forecast made last week by rival Nokia Siemens Networks.

The Espoo, Finland-based joint venture between Nokia and Germany's Siemens AG said it expects demand for network infrastructure to fall 10 percent, twice the earlier forecast of a 5 percent contraction.

Speaking in conference call with reporters, Alcatel-Lucent Chief Executive Ben Verwaayen called 2009 a "transition year" in which "we want to build the foundations so that next year there'll be much better results."

Shares in the company fell 7.2 percent in the first quarter but have rebounded since then, benefiting from the global stock market rally. In early trading on the Paris stock exchange Tuesday, the shares were down 6 percent at euro1.84.

The company has engaged in successive waves of restructuring since the merger, with its current plan calling for the elimination by the end of this year of 16,500 jobs out of a total work force at the end of 2007 of 76,410.

The Alcatel-Lucent tie-up 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.

The combination aimed to create the critical mass needed to compete with the likes of China's Huawei Technologies Co. and LM Ericsson of Sweden.

But intense competition forced to the company to pass many of the savings on to customers in the form of discounts. Analysts said Alcatel-Lucent has not coped as well as some of its competitors.

According to one estimate, Huawei Technologies even surpassed Alcatel-Lucent in terms of market share in the fourth quarter last year. The Shenzen, China-based company leapfrogged into third place behind Sweden's LM Ericsson and Nokia Siemens Networks, according to Nadine Manjaro, senior analyst at Oyster Bay, NY-based ABI Research.

However, CEO Verwaayen noted that last month Alcatel-Lucent notched up a pair of "massive deals" in China, including one worth $1 billion with China Mobile, the world's biggest phone company by subscribers.

China, the world's biggest telecommunications market, has become a strategic battleground for all the big network equipment suppliers. Late last year, the country started a long-delayed introduction of third-generation mobile phone services, setting off a politically charged scramble by foreign and Chinese equipment makers for up to $41 billion in orders for base stations, switching gear, transmission networks and other infrastructure.

Alcatel-Lucent's first-quarter performance is on par with the weak results reported last month by its main rivals.

Ericsson, the world's leading maker of mobile broadband infrastructure, last week reported a 35 percent slide in first-quarter net profit. Nokia Siemens Networks meanwhile blamed the challenging market conditions for a 12 percent fall in first-quarter sales to euro3 billion and an operating loss of euro122 million.

Schaumberg, Ill.-based Motorola Inc., North America's largest maker of telecommunications equipment, last week said its first-quarter loss widened to $231 million on a 28 percent drop in sales.

[Associated Press; By GREG KELLER]

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.