Paris: Alcatel-Lucent unexpectedly posted Thursday its first profit since the company’s creation in a trans-Atlantic merger in 2006, as gains on asset sales helped the telecommunications equipment maker’s bottom line.
The Paris-based telecommunications equipment maker posted a net profit of €14 million ($19.6 million) for the April through June period, compared to a net loss of €1.1 billion a year earlier, when earnings were hit by a nearly billion-euro writedown on wireless technology assets.
In a statement, chief executive Ben Verwaayen said the company was “seeing positive trends” in its sales, gross margin and operating expenses. He reaffirmed that Alcatel-Lucent will come close to breaking even at the operating level this year despite an overall telecommunications equipment market that he still expects to contract between 8% and 12%.
Alcatel-Lucent ended a streak of nine consecutive quarterly losses thanks to after-tax gains of €277 million. It made the profits on the sale of its satellite business and its stake in French defence contractor Thales SA.
Alcatel-Lucent sold its 20.8% stake in Thales to Dassault Aviation for €1.57 billion in May. The company said it is now looking at other possible sales of non-core assets.
Operating loss widened to €130 million in the quarter on sales that slipped 4.8% to €3.91 billion.
The performance beat expectations. Analysts surveyed by Thomson Reuters had forecast a net loss of €191 million in the second quarter, on sales of €3.85 billion. The average estimate for EBIT — earnings before interest and tax — was for a loss of €145 million.
The company’s main business, selling telecommunication networking gear to operators, saw sales decline 10% in the second quarter, for an operating loss of €136 million.
Sales in Alcatel-Lucent’s core wireless division slipped 5% in the quarter, which the company blamed on a continued steep decline in GSM network sales as Chinese operators upgrade their networks to faster third generation equipment.
Alcatel-Lucent has struggled to return to profitability ever since France’s Alcatel acquired Lucent Technologies of the US for $11.4 billion in 2006. Its total losses since then amount to around €9 billion, brought on by successive rounds of restructuring and writedowns of overvalued assets such as its declining CDMA wireless technology business.
France’s industry minister Christian Estrosi on Wednesday called the merger “a mistake” and warned the company against any attempt to offshore its research and development activities or close any French production sites.
Earlier this month Alcatel-Lucent announced plans for 850 new job cuts in France as part of a plan to save several hundred million euros this year.
Last December, Alcatel-Lucent unveiled a plan to cut costs by €750 million this year through measures that include cutting white collar staff and contractors.
In addition, Alcatel-Lucent had previously announced plans to cut 16,500 jobs by the end of this year. The company employed a total of 76,410 as of the end of 2007.