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May 6, 2009

Alcatel-Lucent said late yesterday that it will break even this year, despite posting a worse-than-expected loss in Q1.

The telco equipment manufacturer posted its ninth-straight quarterly loss since the company formed in 2006, losing Euro 402 million compared to Euro 181 million in the same quarter in 2008.

Wireless industry analysts’ estimates predicted a loss of about Euro 270.6 million.

Sales also worsened as well, dropping to Euro 3.6 billion compared to Euro 3.86 billion in 2008.

Alcatel-Lucent has struggled to deal with both macroeconomic conditions and ongoing write-downs stemming from its merger more than three years ago, amid the current global economic slump.

But the company got $1.7 billion in Chinese contracts last week and entered into a $500 million joint venture with Indian telecom company 'Bharti Airtel' to manage its wireline and broadband networks.

Alcatel-Lucent also will close the sale of its stake in Thales to Dassault Aviation for Euro 1.6 billion slated for June 10.

Using the adjusted operating profit numbers by some wireless analysts, the company swung to an adjusted operating loss of Euro 254 million from 2008’s operating profit of Euro 36 million. Analysts expected a loss of Euro 143.4 million.

Although Alcatel-Lucent still expects the global telecom equipment market to be down between 8 percent and 12 percent in 2009, the company expects to break even in 2009.

A-L should complete cost-cutting measures of Euro 750 million by the end of 2009, which should help the company return to an expected net profit during the second half of next year.

Alcatel-Lucent has struggled to overcome ongoing write-downs and has a post-employment and pension fund deficit of Euro 545 million compared to last quarter’s deficit of Euro 429 million. Alcatel-Lucent’s net debt grew to Euro 841 million compared to Euro 389 million at the end of 2008.

Alcatel-Lucent CEO Ben Verwaayen said in a statement “as we discussed before, this year will be a year of great transition. We are reshaping the company and aggressively pursuing our product portfolio rationalization, outsourcing, working capital management and SG&A reduction programs.”

He added “while expected, given seasonality and tough market conditions, we are not pleased with the operating loss incurred in the first quarter. Our guidance for the year remains unchanged and we are taking appropriate actions.”

Nevertheless, Verwaayen insisted the company remained adequately funded and that capital did not need to be raised at this time.

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Source: Alcatel-Lucent.