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APAC surpasses Europe to provide sole growth in Alcatel-Lucent Q3

The Asia-Pacific region is the sole bright spot in Alcatel-Lucent's set of third quarter results, which show the networking vendor still has some work left to do on its restructure and cost-saving plans.
Written by Chris Duckett, Contributor

French networking vendor Alcatel-Lucent has increased its profit margins and lowered its fixed costs, but the company's revenue is down and the Asia-Pacific was the only region stated in its results that showed any increase in revenue.

For its third quarter, revenue for the company fell by 6 percent on last year to come in at €3.25 billion, with gross margins increased to 34 percent, and reported net income being as an €18 million loss, an improvement on the €200 million loss at this time last year.

The company highlighted its free cash flow breaking even before €82 million worth of restructing charges where taken into account.

Alcatel-Lucent CEO Michel Combes said the results showed an improvement in underlying profitability, and the company's restructuring process, dubbed "The Shift Plan", would be moving into a new phase

"Since the launch of The Shift Plan, our primary objective is to enable the company to generate free cash flow on a sustainable, recurring basis, starting in 2015," Combes said. "We have opened the second chapter of The Shift Plan, sharpening our focus on applying innovation to unlock growth in order to address our strategic ambitions within and outside of the telecoms sector."

Broken down by region, revenues in North America fell by 14 percent year-on-year to reside at €1.362 billion and Europe experienced a 13.5 percent drop to €711 million. The only region to provide any growth, Asia-Pacific, surpassed the revenue in Alcatel-Lucent's native Europe to post €721 million, representing an increase of 22.5 percent. The rest of the world contributed €460 in revenue, which was down by €1 million on last year's equivalent quarter.

The company said that the growth in APAC was due to LTE network rollouts in China, as well as "traction" in Japan and Australia, and that its European revenues have only fallen by 1.8 percent once the removal of revenue in Q3 2013 from its former enterprise services division was taken into account.

Earlier this month, Alcatel-Lucent sold its enterprise business to China Huaxin for €202 million, although it retained a minority stake its French holding company. At the time, the unit had more than 2,700 employees worldwide, and operated in more than 80 countries.

The move to divest Alcatel-Lucent Enterprise forms part of the Shift Plan to focus the company, and to reduce its headcount by 10,000 workers when 2015 concludes.

Alcatel-Lucent announced overnight that it had picked up a trio of contract wins in China, scoring exclusive deals for Ethernet core routing with China Unicom and China Mobile, as well as being selected in two regions from a possible five to supply routing equipment to China Telecom.

"These first scale commercial deployments in China of the world’s most powerful core router will provide China Telecom, China Unicom and China Mobile, with the increased capacity needed to meet internet service demand in the world's largest market," Combes said of the deals. "The experience gained in China will lay a solid foundation for future deployments of the 7950 XRS across the entire region of APAC."

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