Alcatel Profit Drops Ahead of Lucent Merger

In its first earnings report since agreeing to merge with Lucent Technologies, Alcatel reported a drop in first-quarter net income on Thursday and warned that increasing competition will probably slow its revenue growth in the second quarter.

Revenue for the first quarter grew 17.6 percent to 3.1 billion euros (US$3.8 billion as of March 31, the last date of the period being reported), from 2.6 billion euros in the first quarter last year. But net income fell to 104 million euros, from 124 million in the first quarter last year, Alcatel said.

A drop in income in Alcatel’s mobile communications segment contributed to the slower growth. Alcatel’s mobile business brought in 57 million euros in income during the quarter, compared to 66 million a year earlier. Revenue for the mobile business, however, grew 15 percent over the same period, to 908 million euros.

The Paris-based company reported solid income growth in its fixed-line business, which increased to 110 million euros from 50 million in the first quarter last year. Revenue for the fixed line operation grew 29 percent to 1.3 billion euros. Demand from operators for network equipment that can allow them to offer triple-play services as well as the transition from dial-up to DSL is driving sales for the group, Alcatel said.

Alcatel also said that it grew its business in North America by 50 percent compared to the same time last year.

Looking ahead, Alcatel expects revenue to increase by only a single-digit percentage for the second quarter. The company blamed intensifying competition for the expected slowdown.

Alcatel also announced Thursday that it has appointed Christian Reinaudo, currently president of Alcatel’s Asia Pacific business, to lead the team that will be responsible for managing the integration with Lucent.

Earlier this week, Lucent also reported a drop in first-quarter earnings, blaming lower sales and litigation charges.

The two companies announced their intention to merge in April. The deal is expected to be completed in six to 12 months, Alcatel said.

-Nancy Gohring, IDG News Service

For related news coverage, read Lucent Earnings Drop Ahead of Planned Merger and Alcatel Hands Satellites to Thales Ahead of Lucent Deal.

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