Alcatel Lucent forecasts more opportunity after deals in U.S. and China

BERLIN — Alcatel Lucent, which has struggled in the wake of its 2006 merger, said last Thursday that it had reached a “turning point” after clinching $5.7 billion in deals to build high-speed wireless networks and supply other gear for the biggest mobile operators in the United States and China.

The company, based in Paris, announced the contracts at the same time it reported its first profitable quarter of the year, posting €25 million, or $35.3 million, in earnings compared to a €182 million loss in the third quarter a year earlier. Sales rose 10.5 percent to €4.1 billion. The results missed forecasts of analysts surveyed by Reuters and Bloomberg News and shares were down more than 3 percent in Paris at midday, however.



Ben Verwaayen, the Alcatel Lucent chief executive, described the agreements with Verizon Wireless, the largest U.S. mobile operator, and the three biggest mobile carriers in China as “massive” for the company, which had struggled to reorganize and streamline in a weak global market following the merger of the French company Alcatel with Lucent Technologies, which was formerly part of AT&T, the U.S. phone giant.

Although the quarterly profit was attributed primarily to tax benefits associated with ongoing adjustments from the merger, Mr. Verwaayen said he did not think it would be “a one-time event.” Mr. Verwaayen mentioned that he think this is a significant turning point in the transformation of the company. They are experiencing good demand for their products.

Without one-time items, the company reported an operating loss of €11 million for the quarter, compared with a €76 million loss a year earlier. But Jouni Forsman, an analyst at Gartner in Nice, France, said that Alcatel Lucent had repositioned itself to become more competitive in the fastest-growing segments of the wireless equipment industry, where demand for network software upgrades, services and applications is strong among mobile operators.

According to Mr. Forsman, the company is executing on the turnaround story. They are in a much better position than they were a couple of years ago. They are controlling costs and executing in a difficult market.

The agreement with Verizon Wireless will generate $4 billion in sales over four years, Alcatel Lucent said. Under the pact, Alcatel Lucent will upgrade the operator’s third-generation wireless network and build a faster network based on a technology called Long Term Evolution. LTE networks, which can download wireless data at speeds much more rapidly than existing systems, are helping operators meet the surge in data traffic from streaming video and social networking services.

Alcatel Lucent said it planned on Friday to sign agreements worth a total €1.18 billion with China Mobile, China Telecom and China Unicom during a visit to France by the Chinese president, Hu Jintao.
Mr. Verwaayen, the Alcatel Lucent chief executive, said “a large chunk” of the sales to the Chinese carriers was new business, with the rest being a reaffirmation of existing sales arrangements. The Verizon sales, Mr. Verwaayen said, was all new business for his company.

Verizon Wireless, a joint venture of Verizon and Vodafone, the British global mobile operator, is upgrading its 3G networks to LTE through 2013 as it sells more data-intensive smartphones and other devices. Some analysts expect Verizon later this year to announce that it will become the second U.S. operator to sell the iPhone, which has only been sold by AT&T.

More jobs cut as Alcatel-Lucent suffers through Q3

By Matt Kapko

Alcatel-Lucent lost more than $373 million during the past quarter the company reported as it announced it would be replacing its chief financial officer. Wall Street appeared relatively pleased with the results, which mostly fell in line with the company’s revised outlook. Alcatel-Lucent's stock was up nearly 3% to $9.67 after the news.

As the company cut around 1,000 jobs during the third quarter its revenues fell 7.8% from the year ago period. The recently combined company has cut more than 5,000 jobs since the beginning of the year and plans to achieve its targeted savings of $867 million through the cuts by year’s end.

“As you can see our results this quarter were essentially in line with the update we provided on Sept. 13, and in a few areas a bit better; however they are still not at a level that we are satisfied with,” CEO Pat Russo said in a statement.

Wireless revenues dipped at least 20% from the year-ago period.

“During the first nine months of operations as a single company, we strengthened our position in key strategic markets and technologies such as IP and mobile broadband required to position the company for long-term sustained growth. Having said that, and in spite of the promise of this industry and the long term benefits of the merger, we recognize that market conditions remain difficult, with continued pressure on revenues and margins due to intensified competition and some slowdown of spending in North America,” Russo added.

The company announced plans to further streamline the organization as it aims to cut costs by an additional $578 million by the end of 2009. Alcatel-Lucent said it will accelerate its ongoing job cuts with an additional 4,000 set to be out of a job by 2009.

“These are difficult but necessary decisions, and we will manage these reductions with care. With this plan, the company is targeting gross margins in the high 30’s and operating margins of 10% or better in the post integration phase beginning 2010,” Russo said.

The company also announced that Hubert de Pesquidoux would be replacing CFO Jean-Pascal Beaufret, who is leaving the company to pursue other opportunities.

Alcatel-Lucent shows off WiMAX handoff in Dominican Republic

By Matt Kapko

Alcatel-Lucent and Dominican Republic-based operator Onemax announced that they’ve completed the world’s first mobile handoffs on a commercial WiMAX 802.16e-2005 network in the 3.5 gigahertz spectrum band just one day after the companies officially launched the network.

Onemax executives, customers, local celebrities and government dignitaries were all on hand to view video telephony, high-definition streaming video, mobile broadband Internet access and Voice over Internet Protocl services in Santo Domingo, the nation’s capital. The services, which were supported with an IP Multimedia Subsystem (IMS) core, were delivered over the Onemax network to users traveling in a van.

“This achievement highlights the readiness of our network today, to offer a whole new range of compelling broadband services to residents of the Dominican Republic as well as visitors,” said Raoul Fontanez, Onemax’s CEO. “This collaboration with Alcatel-Lucent’s also is enabling us to give our customers and other distinguished guests a taste of some of the more advanced multimedia services that we will be able to introduce in the future.”

Onemax is the first service provider in the country to offer full nationwide wireless high-speed broadband Internet, multimedia and VoIP services, the company added. Alcatel-Lucent’s WiMAX Rev-e solution provides wireless broadband access in fixed, nomadic and mobile environments, the companies said.

“These achievements show that WiMAX is here today and poised to play an increasingly critical role in the delivery of mobile broadband services worldwide,” said Oliver Picard, president of Alcatel-Lucent’s activities in Europe and the South America.

Infrastructure awards wrap-up: Colubris, Nokia Siemens Networks, BelAir Networks and more

By Kristen Beckman

The following list details this week's infrastructure awards for the cellular, Wi-Fi, and WiMAX industries. The contracts are broken down by transmission technology, country and vendor. The value of the contract is included when available.

Wi-Fi

--France: Colubris Networks said it has been chosen by Alcatel-Lucent and French operator SFR to provide Wi-Fi equipment for a municipal Wi-Fi network in Paris.

Miscellaneous

--China: Nokia Siemens Networks said it won a convergent charging deal with Guangdong Telecom to provide its charge@once convergent online charging solution for prepaid and postpaid online charging for future mobile and data subscribers. Nokia Siemens Networks also announced a deal calling for it to enhance railway communications for the Hefei-Nanjing line with GSM-R technology.

--Europe: Deutsche Telekom awarded a contract to Nokia Siemens Networks for managed services and next-generation network modernization.

--United States: BelAir Networks said it has been selected by RedMoon Inc. to provide its wireless broadband mesh equipment to cover the town of Addison, Texas. Also in the United States, Cellular South awarded a contract to Alcatel-Lucent to upgrade the carrier’s network in Memphis and Jackson, Miss. The deal is valued at up to $55 million.