Alcatel Lucent SA (NYSE:ALU) narrowed its losses in the first quarter, mostly because of the aggressive cost cutting Shift Plan being implemented by CEO Michel Combes that aimed to cut 10,000 jobs and €1 billion in costs between 2013 and 2015. Five quarters into the plan, fixed cost savings have hit €478 million with this past quarter showing the most progress.

“We began 2014 as we ended 2013 — totally focused on driving implementation of The Shift Plan,” said Combes. “This confirms the industrial logic of the strategic choices we have made and provides a good start on which to build during the rest of 2014 as we work towards our objective of bringing the Group as a whole back to positive free cash flow by 2015.”

alcatel fixed cost savings 0514

Alcatel Lucent’s gross margins up 410 bp on cost cutting

Alcatel Lucent SA’s (NYSE:ALU) revenues fell slightly year-on-year, from €3.06 billion last year to €2.96 billion in 1Q14, but gross profits rose to €956 billion in 1Q14 from €865 million in 1Q13, for a 410 bp jump in gross margins (32.3% last quarter). Adjusted operating income turned positive, climbing to €33 million last quarter from a €179 million loss a year prior, and adjusted net income improved significantly, from a €339 million loss in 1Q13 to a €65 million loss in 1Q14. EPS rose from a €0.14 loss in 1Q13 to a €0.02 loss in 1Q14.

alcatel 2014 highlights 0514

Core Networking, Access segments both saw operating income improve

The Core Networking segment’s revenues were up 6.9% year-on-year to €1.35 billion with €96 million in adjusted operating profits compared to a €15 million loss in 1Q13. Growth was strongest in the IP Routing business, up 16.4%, followed by IP Transport with a 8.6% gain, while IP Platforms lost 6.9% year on year.

Revenues for Alcatel Lucent SA (NYSE:ALU)’s Access segment fell 4.2% year-on-year from €1.70 billion to 1.57 billion last quarter, but adjusted operating income still improved, up from a €132 million loss in 1Q13 to a €37 million loss last quarter.

LGS saw its revenues fall 12% year-on-year, from €52 million to €40 million, and last year’s €2 million profit turned into a €1 million loss in 1Q14, pulling down Alcatel Lucent SA (NYSE:ALU)’s overall numbers. But the sale of LGS was finalized on March 31 this year for $200 million, with $100 million paid on closing.