Alcatel-Lucent reported revenues down 9.8 percent year on year to EUR 3.25 billion in the first quarter, blaming components shortages and an uneven recovery in the telecommunications network equipment and related services market. Some geographical areas, especially North America, are seeing a recovery driven by IP, terrestrial optics and WCDMA/LTE, according to group CEO Ben Verwaayen. Nevertheless, if revenues grew by 6 percent at constant currency in North America, they declined by 9 percent in Europe, fell by 19 percent in Asia Pacific, and dropped by 23 percent in the rest of the world. Alcatel-Lucent made a EUR 195 million adjusted operating loss and a EUR 515 million net loss in the first quarter.
By operating segments, Networks saw a double-digit decline in revenue, partly because of tightness in availability of components in its supply chain. This was particularly the case in wireless access and terrestrial optics. Applications revenues declined 6.3 percent year on year with enterprise solutions & Genesys almost stable (slightly growing at constant currency). The Services segment showed a 3.1 percent decrease, less than in the other business areas, thanks to managed services and multi-vendor maintenance. On the profit/loss side, the first quarter adjusted gross margin came in at 32.6 percent of revenue, compared to 31.5 percent in the year ago quarter and 36.7 percent in the fourth quarter 2009. The sequential decline in gross margin reflects the seasonal drop in volumes. The annual increase was driven by ongoing initiatives to reduce fixed operations, procurement and product design costs that were partly offset by lower volumes. Operating expenses decreased 9.7 percent on the first quarter of 2009, reflecting ongoing cost reduction plans.
Verwaayen said he was encouraged by the continued progress in cost management (110 basis points gross margin increase, year on year) and continued decrease in operating expenses. This will continue throughout the year. With the strengthening demand in some segments and geographical areas combined with the company's actions in progress, Alcatel-Lucent anticipates a strong sequential recovery in its top-line and adjusted operating income. It reaffirmed a full year outlook of up to 5 percent nominal growth in the equipment and related services market, which will allow it to reach a 1-5 percent adjusted operating margin for the full year.
