Alcatel Confident Despite Loss

Alcatel Confident Despite Loss

Though he had to report a $536.6 million loss for the quarter, Alcatel-Lucent chief executive Ben Verwaayen assured investors that his cost-cutting and restructuring plans will continue apace. Investors were heartened by his outlook and shares in the company rose in late trading.

Shares of Alcatel-Lucent rose 0.2%, to 1.96 euros ($2.62), during late trading in Paris on Tuesday, recovering from an early-morning loss of around 6.0%. The stock is still up 36.9% since Feb. 5, buoyed by improved market sentiment surrounding technology companies like Ericsson and Nokia.

On a conference call to announce the results, Verwaayen called 2009 a "transition year" and said it would present a foundation on which to produce much better results. He said that the unsatisfactory quarterly performance would not change the company's 2009 guidance.

"There was nothing new on the call, but the company was confident of being able to reach its goals," said Roland Pitz, an analyst with Unicredit.

Alcatel-Lucent hopes to break even this year on an adjusted operating-profit level, which would exclude restructuring costs, asset write-downs, one-off gains and the knock-on effects of the merger that created the company in the first place. France's Alcatel bought American company Lucent Technologies in 2006, in an all-share deal worth more than $13.0 billion.

The company reported a double-digit decline in North American sales in the first quarter, and said that product mix and volumes had knocked 4.7 percentage points off its gross margin over the year. CEO Verwaayen is trying to slim the company down by slashing management positions and contractors--Alcatel has cut 290 management positions out of a planned 1,000, along with 770 contractors out of a planned 5,000--but he will need to play more cards to fully regain investor confidence.

Sal. Oppenheim analyst Nicolas von Stackelberg said that Alcatel's cash burn over the quarter was a concern, with net debt doubling to 841 million euros ($1.1 billion) in three months--but the company's sale of its stake in Thales should offset the need for more capital.