Alcatel-Lucent Posts $3.74 Billion Quarterly Loss

Alcatel-Lucent Posts $3.74 Billion Quarterly Loss

Alcatel-Lucent SA, the world's largest maker of telecommunications equipment, said its loss ballooned in the fourth quarter and will scrap the dividend after writing down the value of a wireless-networks unit.

The loss swelled to 2.58 billion euros ($3.74 billion) from 615 million euros a year earlier, Alcatel-Lucent said today in a statement. Excluding 2.52 billion euros of writedowns, the net loss was 48 million euros. Analysts predicted a 181 million-euro profit on that basis, the median of 12 estimates in a Bloomberg survey. The company forecast a loss in the first quarter.

Alcatel-Lucent's market value has plunged 13.5 billion euros since Alcatel SA bought Lucent Technologies Inc. in December 2006, as the merger and a plan to cut 16,500 jobs failed to compensate for price competition and falling orders. Chief Executive Officer Patricia Russo has yet to steer the Paris-based company back to health, said Frederic Hamm at Agilis Gestion.

``There's a large gap between what analysts expected and what Alcatel-Lucent reported,'' said Hamm, who helps manage 150 million euros in Paris. ``We expected a profit and it was loss. Again they report a loss, with a profit warning as well. It's a little worrying.''

Alcatel-Lucent rose 1 cent, or 0.2 percent, to 4.14 euros as of 9:17 a.m. in Paris, after dropping as much as 8 percent. Before today, Alcatel-Lucent had fallen 59 percent in the past year, versus a 51 percent decline for Ericsson AB, the largest maker of wireless networks. Alcatel-Lucent is the worst performer in France's CAC 40 Index, which lost 17 percent in the period.

CDMA Writedown

The company wrote down the value of the business that provides equipment that uses wireless technology called code- division multiple access. Lucent was the market leader in CDMA when acquired by Alcatel. The company also cut the value of the unit that provides IP multimedia subsystems, used for voice and data communications on Internet-based fixed and mobile networks.

``We don't give the split, but the very large impairment is on the CDMA,'' Chief Financial Officer Hubert de Pesquidoux said in a conference call.

Code-division multiple access is used by phone companies including Verizon Communications Inc., Sprint Nextel Corp., China Unicom Ltd. and NTT DoCoMo Inc.

Alcatel-Lucent has reported falling profit from the technology as operators in emerging markets invest in networks that use the global system for mobile communications, or GSM, and operators in mature markets invest in newer technology to provide so-called third-generation mobile services.

``The slower-than-expected ramp-up of revenues'' from the newer technology, known as W-CDMA, ``has severely impacted profitability,'' Russo said in the statement.

Sales, Dividend

The company said that historically, first-quarter sales have fallen 20 percent to 25 percent from the previous quarter. Alcatel-Lucent will have an operating loss in the first quarter as a result, the company said.

``In light of these results and of a more uncertain market outlook, the board has determined that it is prudent to suspend dividend payment for 2007,'' according to the statement. The company paid a dividend of 16 cents a share in each of the past two years.

The company predicts a full-year operating margin of between 2.5 percent and 5 percent, Pesquidoux said in a conference call.

In October, Alcatel-Lucent raised its job-cut target to 20 percent of the workforce in response to falling sales. At the time of the merger, the company said it would cut 9,000 jobs, and raised that to 12,500 a year ago.

Sales rose 18 percent to 5.23 billion euros from 4.42 billion euros in the year-earlier quarter. Sales had been seen at 4.87 billion euros, based on the median of 14 estimates.

Restructuring Costs

The company has said restructuring costs will be about 1.6 billion euros, including 900 million euros in 2007.

Alcatel-Lucent forecast in June that it would have 1.7 billion euros in annual cost savings after three years, and savings of 600 million euros this year. About 55 percent of the total will come from job cuts and 45 percent from process improvements and areas such as purchasing, according to the company.

In the fixed-line network business, revenue increased 15 percent, while the mobile business boosted sales 26 percent.

Alcatel-Lucent's ``convergence'' unit, which makes products that handle video transmissions via fixed and mobile networks, reported a 4.6 percent drop in sales.

October Forecast

In October, Alcatel-Lucent said that 2007 sales would be little changed at constant exchange rates, from a previous outlook for sales to be ``flat or slightly up'' from the previous year.

Gross profit, or sales minus the cost of goods, jumped 17 percent to 1.69 billion euros. Profit on that basis had been expected to rise 18 percent, based on the estimates.

Estimates for the adjusted results ranged from a loss of 207 million euros to a profit of 409 million euros, as analysts differed on whether to include restructuring costs and writedowns.

Since Alcatel-Lucent was created in December 2006, the company announced a spending slowdown by customers in North America and said Pesquidoux would replace Chief Financial Officer Jean-Pascal Beaufret.