Alcatel-Lucent suffers Q4 loss on writedown

Alcatel-Lucent reported higher sales but a net loss for the fourth quarter due to a big writedown in its CDMA (code division multiple access) and IP (Internet protocol) multimedia services businesses.
The company said revenue rose 18 percent to €5.2 billion on the back of strong performance at several of its major business units. But despite the stronger sales the company saw its net profit plunge into the red to the tune of €2.6 billion. This was largely due to the €2.5 billion writedown.

Its wireline and wireless carrier business was strong and revenues were €3.7 billion in the quarter against €3.2 billion during the same period a year earlier. The company benefited from strong growth in carrier-type optical networking, and the GSM (Global System for Mobile Communications) and WCDMA (Wideband CDMA) sectors. Broadband access revenue fell on the back of a decline in the number of DSL lines delivered.

Revenues were up 27 percent in the services business to €1 billion after the company won large network operations contracts and worked on IPTV and IP network integration projects. Its enterprise business segment saw revenues of €435 million, up about 4 percent, thanks to strong momentum in Europe and Asia.

The report came with bad news for investors. The company suspended its dividend payment for 2007 "in the light of these results and or a more uncertain market outlook," it said.

"We just thought very plainly that it was good financial discipline looking at both our net income in '07 and the very tough macroeconomic environment," said Hubert de Pesquidoux, chief financial officer, on a conference call.

CEO Patricia Russo warned that the company doesn't have a positive short-term outlook, particularly with a looming recession in the U.S. given Alcatel-Lucent's dependance on business there.

"There is a level of uncertainty ... that leaves a lot unknown," Russo said.

Despite interest in IP networking and 3G broadband services, growth over the next year is likely to be flat or just slightly up, Russo said. Taking into account currency differences, the market will likely be down, she said.

Some customers are also pursuing network-sharing arrangements, which could affect how much those companies spend on their own infrastructure, she said.

Russo defended the 2006 merger of Alcatel and Lucent and said the company is still trying to reduce costs. So far, about 6,700 employees have been let go in a restructuring plan that will shed a total of 12,500 employees, she said.