Alcatel-Lucent Still Struggling to Turn a Profit

It has been a long tough road for Alcatel-Lucent toward profitability. The company recorded its first yearly profit last quarter, though for its first quarter of 2012, the picture is not quite as rosy.

For the quarter, Alcatel-Lucent reported revenue of 3.2 billion Euro, for a 12.3 percent year-over-year decline. Net income was reported at 398 million Euro, though there is a catch. During the quarter, Alcatel-Lucent completed the sale of its Genesys call center division.

“We received almost 1.1 billion Euro of cash proceeds from the Genesys sale, and the capital gain on that was in excess of 600 million Euro,” Alcatel-Lucent CFO Paul Tufano said during the company’s earnings call. “When you eliminate that and you look at adjusted operating profit, the quarter was a loss of 221 million Euro.”

The sale of the Genesys division is expected to help Alcatel-Lucent focus on their enterprise networking business. In an interview with in March, Michel Emelianoff, president of Alcatel-Lucent’s enterprise networking division said the group is now focused on unified communications (UC) and switching.

In Alcatel-Lucent’s broader portfolio, IP networking is a growth spot. Tufano noted that during the quarter Alcatel-Lucent’s IP networking revenues grew by 23.5 percent to 431 million Euro.

“It is a very, very positive, strong innovation pipeline, and the order book looks even better,” Tufano said. “It’s a important point to make because IP is going to be the dominant technology throughout networks wherever you go and look.”

In contrast, Alcatel-Lucent’s optics division reported revenues of 489 million Euro for a decline of 25.2 percent. The company is optimistic about its future prospects, however, as demand for 100 gigabit optical technology builds. Alcatel-Lucent recently announced the Photonic Service Engine (PSE) chip that can actually scale up to 400 gigabits.

Another down note for Alcatel-Lucent was its wireless division, which was hit by a 29.5 percent decrease in quarterly revenue, down to 788 million Euro. The company blamed lack of demand for GSM technology in China as being the key reason for the decline.

Though Alcatel-Lucent is facing its fair share of market challenges due to market conditions and competitive pressures. CEO Ben Verwaayen is taking a somewhat stoic perspective on the situation.

“If we look to the market, if you look to the fundamentals of the market, nothing has changed,” Verwaayen said during the earnings call. “People still build out networks. People are making plans for fibre networks around the world and governments are looking to building a digital infrastructure.”

Sean Michael Kerner is a senior editor at, the news service of the IT Business Edge Network, the network for technology professionals Follow him on Twitter @TechJournalist.

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