Alcatel Lucent Delivers On Shift Plan

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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 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.

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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.

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About the Author

Michael Ide
Michael has a Bachelor's Degree in mathematics and physics from Boston University and Master's Degree in physics from University of California, San Diego. He has worked as an editor and writer for several magazines. Prior to his career in journalism, Michael Worked in the Peace Corps teaching math and science in South Africa.

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