Alcatel-Lucent unveils first profit of $ 1.33 b in six years

PARIS: French telecommunications equipment maker Alcatel-Lucent caught investors by surprise on Friday with a 2011 profit of more than a billion euros ($1.33 billion), its first positive result in six years.

In 2010 the group had posted a loss of 334 million. The rebound was unveiled along with news of a positive fourth-quarter cash flow and sent Alcatel shares soaring in midday trading to lead gainers on the Paris stock exchange.

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The group’s results are far better than expected,” commented Arnaud de Champvallier, head of Turgot Asset Management. “Many investors had given up on its stock because the group was very disappointing and its strategy was confused,” he said. “But with these kinds of results, part of the market might pile back in.”  Alcatel managed its full-year profit of 1.09 billion euros despite a 2.1 slip in sales to 15.3 billion. The group also unveiled a licensing deal whereby its patent portfolio would be made accessible via a syndicate, another development hailed by analysts.  In the fourth quarter of 2011 meanwhile, Alcatel’s net profit more than doubled to 868 euros, while sales fell by 12.9 percent to 4.15 billion owing to a double-digit drop at its mobile and networks division.

Alcatel benefited from favourable tax conditions in the United States, while the sales drop resulted from a sharp decline in investment by operators following several quarters of strong growth, Alcatel said.

At the net profit level, “it was the first full year that we were in the black since the merger” in 2006 of the French group Alcatel and US partner Lucent, chief executive Ben Verwaayen told a telephone news conference.

A geographical breakdown in the fourth quarter showed weaker results in Asia, Europe and North America, while Central and South America continued to report robust activity.  Alcatel reported a cash flow of 541 million euros, which was boosted by annual cuts in fixed costs of 300 million euros.

“This news is very reassuring because it eliminates investors’ fears about possible problems with liquidity,” said Eric Beaudet, an analyst with Natixis.

Alcatel appears to have overcome obstacles to its integration of Lucent that included problems between senior managers and product overlaps that forced the group to implement a vast restructuring plan. It expected to save an additional 500 million euros this year, Verwaayen said.

In late January, unions said the group planned to eliminate between 1,650 and 1,800 positions in Europe this year, while Alcatel has said its staff would be “repositioned internally.”