Alcatel-Lucent’s brief return to profitability has come to an end. After one quarter of posting its first profit since 2006, the infrastructure giant once again fell to a loss as global operators continue to cut back on equipment spending.
Alcatel-Lucent’s third-quarter losses widened to $269.9 million compared to last year’s loss of $59 million. Sales dropped almost 10 percent to $5.4 billion.
Adding to the gloomy news, Alcatel-Lucent CEO Ben Verwaayen said the company would shrink between 8 percent and 12 percent over the course of this year, adding that he expected the company to break even by year-end despite what he mildly called “a challenging market environment.”
Not all share Verwaayen’s optimism, however. IHS Global Insight analyst Peter Boyland says the company must turn the corner in the next 12 months if it is to survive.
“Without Ericsson’s scale and the big-money backers [Nokia Siemens Networks] enjoys, Alcatel-Lucent is once again the favorite to be the first major victim of the recession in European telecoms,” Boyland said in a report.
Alcatel-Lucent’s European sales were hit particularly hard this quarter, dropping over 14 percent to Euro 1.2 billion. The company’s carrier and enterprise segments also saw steep declines in sales, with carrier sales falling 14.6 percent to $3.24 billion and enterprise sales falling 17.2 percent to $369 million.
The company’s wireless network division was hit particularly hard with an 18.3 percent drop as growth in 3G failed to offset ongoing declines in legacy 2G technology.
Alcatel-Lucent said that on a worldwide basis, GSM sales were “sharply impacted” by migration to 3G, sluggish subscriber growth and low spending. Declines in CDMA technology sales were largely attributed to “continued weakness” in North America, which was only partially offset by deployments in China.
W-CDMA was a bright spot for the company with best-ever quarterly sales, driven primarily by growth in China and North America.
Filed Under: Infrastructure