- Sam SchechnerThe Wall Street JournalCANCEL
Feb. 6, 2015 2:10 a.m. ET
on Friday said its fourth-quarter profit was boosted by cost controls and rising sales at its high-margin Internet-routing business, putting it on track for positive free cash flow in 2015 for the first time.
The Paris-based telecommunications-equipment maker reported a net profit of €271 million ($311 million), or 8 cents a share, compared with a year-earlier profit of €134 million or 5 cents a share.
Profitability rose as the company continued to increase sales of its higher-margin Internet backbone equipment for clients in the U.S., Europe and Asia, boosting gross margins to 34.7% from 33.4% a year earlier. The company generated €264 million in free cash flow—roughly in line with analyst expectations—though not enough to push the that metric into the black for the full year.
The results show progress for Chief Executive
who has for nearly two years been pursuing a “Shift Plan” to redirect the company’s resources to a few profitable areas, while selling off some assets. Created in 2006 through the merger of France’s Alcatel and the U.S.’s Lucent Technologies, Alcatel Lucent has been eating up cash ever since.
Mr. Combes’s plan has led to heavy staffing cuts and an effort to broaden the company’s customer base—with a goal of achieving to positive free cash flow this year. “Alcatel-Lucent is clearly back in the game,” Mr. Combes said on a conference call with journalists.
The company’s Internet-routing division has been a key part of that plan. One of the firm’s most profitable, the unit has become the heart of Alcatel’s new “core” networking group that it bills as a top priority. Mr. Combes said the unit managed in the fourth quarter to pull in 15% of its revenue from customers outside the telecommunications business, helping boost revenue 15% at constant exchange rates to €664 million, Mr. Combes said.
Overall revenue in the fourth quarter fell to €3.68 billion, down from a reported €3.93 billion last year. Excluding assets sold, including the company’s enterprise phone business and its U.S.-based government services division, year-earlier revenue was €3.76 billion, the company said.
The company’s wireless division—its single largest—continued a slow slide, with revenue down 9% from a year earlier at constant exchange rates to €1.21 billion for the quarter.
The company’s IP transport division, including its business making and laying submarine cables, saw revenue rise to €649 million. Alcatel said Friday that its previously disclosed plan to sell a stake in the submarine division in a public offering remains on track and should occur in the second half of 2015.
Write to Sam Schechner at email@example.com
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