PARIS – Alcatel-Lucent reported a smaller increase in revenue than analysts had expected, but returned to profit in the second quarter. For the full year, the company expects to grow faster than the market as a whole and to improve its operating margin.
The company pointed to market share gains in optical and IP (Internet Protocol) networking equipment, and sales growth in the Americas and Asia, as reasons for the good quarter.
Revenue for the second quarter totalled €3.9 billion (US$5.61 billion as of June 30, the last day of the period reported), up 2.4 per cent on a year earlier but lower than most analysts had expected.
Excluding the effects of exchange rate fluctuations, acquisitions and divestments, revenue grew 10.4 percent year on year, the company said.
The fastest growing business segment was IP networking, where revenue for the quarter rose 27.7 per cent year on year, to €406 million. Wireless networking revenue rose 5.7 per cent to €1.08 billion, and optical networking revenue rose 3.7 per cent to €645 million. Revenue from legacy wireline networking products, however, fell 2.5 per cent to €357 million.
Revenue from applications, too, remained flat at €486 million, but within that total the balance is shifting from enterprise applications (€285 million, down 6.6 per cent) towards networks applications (€200 million, up 6.4 per cent).
Services revenue slipped 1.4 percent to €871 million for the quarter, but would have risen by 2.9 percent at constant currency rates, Alcatel-Lucent [NYSE: ALU] said. Revenue from outsourcing and managed services activities rose 20 per cent, compensating for a fall in network builds during the quarter.
Net income rose to €43 million, an improvement on the loss of €184 million in the same quarter last year. Earnings per share of €0.02, or $0.03 per American Depositary Share, were roughly in line with analyst expectations.
The company’s operating margin for the quarter was 2.8 per cent. Services generated the highest margin, at 6.1 per cent, with networks, the bulk of the company’s business, generating an operating margin of just 1.9 percent in the second quarter, down 2.4 percent from a year earlier.
For the full year, Alcatel-Lucent forecasts its operating margin will rise to 5.1 per cent, and that revenue will grow faster than the addressable market.