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.