Alcatel Lucent SA (NYSE:ALU) (EPA:ALU) (BIT:ALU) reported better than expected third quarter results Wednesday. The company posted net sales of 3.67 billion euros ($5.05 billion), up 7% from the previous year. The French-American telecom equipment maker was helped by solid growth in its U.S. revenues, where the market was almost flat. Third quarter losses narrowed to 200 million euros.
Alcatel Lucent’s restructuring plan working
This turnaround indicates that CEO Michel Combes’ restructuring plan is working. Combes has been cutting costs ruthlessly to bring the company back into profits. Alcatel Lucent SA (NYSE:ALU) (EPA:ALU) (BIT:ALU) has suffered six quarters of straight losses. Michel Combes joined the Paris-based company in April this year. He has been selling assets and eliminating jobs. Alcatel Lucent is now focusing on fixed broadband and high-speed mobile products. Combes plans to save 1 billion euros and cut 10,000 jobs by 2015.
Dan Loeb's Third Point returned 11% in its flagship Offshore Fund and 13.2% in its Ultra Fund for the first quarter. For April, the Offshore Fund was up 1.7%, while the Ultra Fund gained 2.3%. The S&P 500 was up 6.2% for the first quarter, while the MSCI World Index gained 5%. Q1 2021 hedge Read More
The company was formed in 2006 after the merger of Alcatel and Lucent Technologies. Since then, Alcatel Lucent SA (NYSE:ALU) (EPA:ALU) (BIT:ALU) has seen three CEOs and six restructuring plans. But Michel Combes aims to save the group. He has narrowed the research focus to only a few areas. Decline in general and administrative expenses helped the company save 259 million euros in the first three quarters. With a record like that, Alcatel Lucent is likely to exceed its cost-cutting goal of 300 million euros for this year.
What encouraged investors the most was Combes’ comment that the company will end the year on a high note. Gross margins improved to 32.6% from 27.8% in the same period last year. The high margins were the results of cost cuts and increased sales of high margin IP networking routers. Alcatel Lucent SA (NYSE:ALU) (EPA:ALU) (BIT:ALU) said sales of its IP products rose 7% to 580 million euros. While sales in Europe rose 3%, its Asian business slumped 10%.
Alcatel Lucent SA (NYSE:ALU) (EPA:ALU) (BIT:ALU) is facing stiff competition from low-cost Chinese vendors. Nokia Siemens Networks and Ericsson SA (NASDAQ:ERIC) (ETR:ERCB) are also posing a threat to Alcatel Lucent. However, its U.S. business remains relatively safe because Chinese vendors are not allowed to enter that market due to security concerns, reports Marie Mawad of Bloomberg.
Nokia to acquire Alcatel Lucent?
Sources told Reuters in September that Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s NSN plans to bid for Alcatel Lucent SA (NYSE:ALU) (EPA:ALU) (BIT:ALU), or at least for some of its businesses. Nokia will receive 5.44 billion euros in cash by selling its handset business and patents to Microsoft Corporation (NASDAQ:MSFT). The Finnish company has expressed interest in Alcatel Lucent SA (NYSE:ALU) (EPA:ALU) (BIT:ALU)’s wireless equipment business to match rivals Ericsson (NASDAQ:ERIC) (ETR:ERCB) and Huawei Technology Co Ltd (SHE:002502).
However, Michel Combes refused to talk about a potential deal with Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V). He said his aim is to strengthen Alcatel Lucent’s business.
Shares of Alcatel Lucent SA (NYSE:ALU) (EPA:ALU) (BIT:ALU) soared 12.73% to $3.72 at 10:31 a.m. EDT.