Alcatel-Lucent swings to net loss

Telecoms equipment maker Alcatel-Lucent has swung to a net loss of €353 million ($463 million) for the first quarter of 2013, from a net profit of €259 million in the same period last year, when its earnings were boosted by the sale of its Genesys call-center business.

The company reported a narrowing of its operating loss to €202 million, from €290 million a year ago, with revenues creeping up by 0.6%, to €3.23 billion, over the same period.

Telecoms equipment maker Alcatel-Lucent has swung to a net loss of €353 million ($463 million) for the first quarter of 2013, from a net profit of €259 million in the same period last year, when its earnings were boosted by the sale of its Genesys call-center business.

The company reported a narrowing of its operating loss to €202 million, from €290 million a year ago, with revenues creeping up by 0.6%, to €3.23 billion, over the same period.

The slight increase in sales was driven entirely by growth in North America, home to Alcatel-Lucent’s biggest customers, with European revenues down by 10% and sales in the Asia-Pacific sliding by 5.8% between the first quarters of 2012 and 2013.

The vendor also suffered a balance-sheet setback, reporting net debt of €358 million for the first quarter of 2013, compared with net cash of €147 million for the fourth quarter of 2012.

In a statement, Alcatel-Lucent (Paris, France) said that restructuring charges, interest payments and tax had all contributed to the worsening of its financial situation.

“Free cash-flow remains a challenge,” said Michel Combes, the chief executive of Alcatel-Lucent. “Strong focus will be placed on working capital management to reverse some of the negative impact incurred this quarter.”

Combes took over from Ben Verwaayen as chief executive of Alcatel-Lucent on April 1 and is under pressure to formulate a compelling strategy for the struggling manufacturer.

“We are actively reviewing the Group’s businesses and operating model to design the conditions for value creation in the future,” he said. “I am looking forward to sharing the outcome in early summer.”

Verwaayen, who joined the company from his previous role as chief executive of UK telecoms operator BT (London, UK) in September 2008, had failed to get the equipment maker back on track despite restructuring efforts and the sale of unwanted assets.

Like other established vendors, the company has faced a strong challenge from China’s Huawei (Shenzhen, China) and ZTE (Shenzhen, China) in recent years, while the merger between Alcatel and Lucent that brought it into existence looks responsible for many of its problems.

The vendor has a plan to slash 5,000 jobs and €1.25 billion in annual expenses, but investors will be hoping Combes’ strategy involves more than just cutting costs.