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Alcatel-Lucent's problems overshadow Q4 net profit

Alex Scroxton
Alcatel-Lucent today posted its first ever quarterly net profit since its inception in 2006, but its full year figures were blighted both by the impact of the recession and the disastrous performance of the last few years, showing that while it is on the right track there is still a mountain to climb.

The Franco-American networking vendor, which has failed to turn a profit in 13 quarters, booked net income of €46m (£40.5m) for the fourth quarter of its fiscal 2009, which closed at the end of December.

However, the profit came not from any significant improvement in Alcatel-Lucent's performance, rather from three one time items relating to the amendment of its pension plan, a tax free capital gain relating to the disposal of its motors and drives business and an increase in litigation reserves.

Revenues in the fourth quarter fell 19.9% year-on-year to €3.96bn - 16.8% at constant currency - with its core networking business in particular seeing big declines, while services remained flat and application software grew slightly.

Over the course of the year Alcatel-Lucent made a net loss of €524m, while sales were down 10.8% on 2008 to €15.15bn.

In a statement, CEO Ben Verwaayen said that in spite of the ongoing downward trend, he was pleased with the operational progress the firm is making.

"Revenue came in at the lower end of the indicated range for the year due to the fact that our fourth quarter was not as strong as expected. However, I am encouraged by the strong sequential growth in our orders and by the accelerated traction we are seeing in next generation technologies," he said.

As of the end of 2009, Alcatel-Lucent claims to have reduced its cost and expense structure by approximately €950m at constant currency and brought down its break-even point by €1.05bn, and is now predicting that a stabilising macroeconomic climate will lead to growth this year.

While it did not provide guidance for the first quarter of 2010, it is aiming to reach an adjusted operating margin in the low to mid single-digits by December.

"The explosive growth of mobile internet will drive market growth in 2010 and beyond," said a confident Verwaayen. "As the trusted partner of our customers in the migration towards IP and LTE, we are well positioned to benefit from this growth and are on the right track to become a normal company by 2011."

Quite what Verwaayen, the man who turned around BT, means by 'normal company' is unclear but if in the next 12 months he can pull off the turnaround of Alcatel-Lucent, which at times seemed doomed, he will have more than earned his reputation.

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