First quarter 2011 revenues of Alcatel – Lucent (ALU) increased 15.2% year-over-year and decreased 23.1% sequentially to Euro 3.740 billion ($5.109 billion), exceeding the Zacks Consensus Estimate of $5.05 billion.
Loss per share was 1 cent, lower than the estimated 4 cents.
Networks revenues witnesses a year-over-year increase with all divisions growing. IP revenues maintained a robust growth rate with an increase of more than 20% along with wireless which grew 34% driven by 3G defined as the sum of WCDMA & CDMA EV-DO and 4G technologies.
Applications revenues registered a single digit increase with Network applications advancing at a double digit rate and Enterprise applications increasing close to 6%.
Services revenues grew at a single digit rate with strong double digit growth for Network & System integration.
Net cash was €106 million, versus €362 million as of Dec 31, 2010.
Funded status of Pensions and OPEB was €10 million at the end of March, compared to the underfunded status of €516 million as of Dec 31, 2010.
Telecommunications companies continue to be the largest group in terms of mergers and acquisitions, which have helped in ALU’s penetration as companies try to consolidate with a single vendor. There has been a trend toward consolidation with one or two providers from the telecom industry to cut costs and simplify the purchasing process, and this has caused several mergers in this industry. The creation of a clear #2 behind LM Ericsson Telephone Co. (ERIC) in the market should help boost the competitiveness in the industry and provide Alcatel-Lucent the wherewithal to improve its position over the long term.
With strengthening demand in some segments and geographical areas, we anticipate a strong sequential recovery in top line and operating income levels.
The combined Alcatel-Lucent continues to sort out its restructuring, which goes far beyond rationalizing the product line and consolidating its operations. While we believe management will do its best at consolidating the company and making the cuts necessary to survive, it may also have to contend with push-back from the French unions and the political fallout. Major competitors of Alcatel-Lucent are Cisco Systems, Inc. (CSCO) and LM Ericsson Telephone Co.
Based in Paris, Alcatel-Lucent is a diversified global manufacturer of telecom equipment with over 77,000 employees in 130 countries worldwide. Apart from being the world’s leading supplier of digital subscriber line (DSL) equipment, Alcatel-Lucent is among the leaders in telephone switching equipment, optical and data networking gear, mobile infrastructure, and communications software. The company has also been a big player in mobile handsets, fiber optic cable and Internet routers.
We continue to maintain a Neutral rating on Alcatel-Lucent, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.
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