Alcatel-Lucent reported Q2 revenue of EUR 4.101 billion, up 6.1% sequentially but down 5.2% year-over-year. At constant Euro/USD exchange rate, revenues grew 1.7% year-over-year and 8.5% sequentially. The adjusted2 gross profit was EUR 1,433 million or 34.9% of revenues, compared to an adjusted2 gross profit of EUR 1,447 million or 33.4% of revenues in the year ago-quarter.
During the second quarter of 2008, the CDMA activity declined at a higher pace than the company had planned. This was due, to a large extent, to a strong reduction in the capital expenditure of a key customer in North America.
Some highlights from the period:
Carrier
- For Q2, revenues for the Carrier operating segment were EUR 2,811 billion compared to EUR 3,104 million in the year-ago quarter, a 9.4% decrease at current exchange rate and a 3% decrease at constant rate.
- Fixed access revenue decreased at a double-digit rate, due to the ongoing decline in new subscribers to copper-based broadband access.
- Alcatel-Lucent shipped 7.7 million xDSL ports in the quarter, down 20% from the demanding basis of the year-ago quarter but up 16% sequentially. The year-over-year decline in xDSL revenue was only partially compensated by the very strong growth in FTTx revenue.
- In data networking, growth in edge routing was softer this quarter than in the first one, which is essentially attributable to a demanding year-over-year comparison as well as the timing of deliveries at certain large customers. The ATM switching business continued on its structural decline path in the second quarter 2008, albeit at a more moderate rate than in the first quarter.
- Optical networking enjoyed strong double-digit growth this quarter, essentially driven by submarine activities and wireless transmission while terrestrial optical networks grew at a mid single-digit rate.
- In mobile networks, the GSM business grew at a double-digit rate in the second quarter, which was driven by network expansions in China, India, the Middle East and Africa. W-CDMA revenue grew very strongly, benefiting from the ramp-up in revenues at several key clients, including AT&T Mobility, Bouygues and SFR and sustained growth at other accounts such as Orange, SKT and KTF. CDMA revenue declined sharply year-over-year, hurt by the significant reduction in the capital expenditure of a key customer in North-America.
- Core switching activities contracted at a moderate rate in the second quarter, as the ongoing decline in legacy TDM voice was almost entirely offset by the strong, double-digit growth in Fixed and mobile NGN. It must be noted that our NGN activity is now close in size to our TDM activity.
- Applications activities grew in excess of twenty percent the second quarter, a sharp contrast to the moderate growth rate achieved in the first quarter, due to a pick-up in revenues from Messaging applications and a stabilization in our legacy IN (Intelligent Networks) business.
Enterprise Operating Segment
- Q2 revenues for the Enterprise operating segment were Euro 386 million compared to Euro 376 million in the year-ago quarter, an increase of 2.7%at current exchange rate and of 7% at constant rate. Adjusted2 operating income1 was Euro 29 million, or 7.4% of revenues compared to Euro 23 million or 6.1% in the year ago quarter.
- Enterprise Solutions grew in the high single-digit range, with a particularly strong performance in data networking but also good growth in IP Telephony. The division also showed progress in Security solutions, driven by recent successes in firewalls and additional orders for its Laptop Guardian product. From a geographic standpoint, growth remained solid in North America and was strong in APAC.
- Genesys, the contact centre software activity, enjoyed another quarter of double-digit growth, driven by a strong performance in Europe and good resilience in North America.
Services Operating Segment
- Q2 revenues for the Services operating segment were Euro 818million compared to Euro 750 million in the year-ago quarter, an increase of 9.1% at current exchange rate and of 16% at constant rate. Adjusted2 operating income1 was Euro 71 million or 8.6% of revenues compared to Euro 29 million or 3.9% of revenues in the year ago quarter.
- Operations grew very strongly, as a result of some of the very large contracts won in 2007 and in 2008. Alcatel-Lucent announced two large managed services contracts in the second quarter, including Reliance Communications in India and Sunrise in Switzerland.
Network integration also enjoyed another quarter of very strong growth which was driven by several large and complex projects for the design, integration and optimization of networks in Asia and North America. - Growth in professional services — which includes the integration of software applications either from Alcatel-Lucent or third parties – was more moderate this quarter than in the first one, which is mainly due to a much more demanding comparison basis. For the first half, however, this business grew in the high single-digit range. Finally, Maintenance returned to growth this quarter, due to sustained growth in multivendor maintenance combined with an unusually strong quarter in legacy maintenance.
- The segment enjoyed a material improvement in profitability year-over-year, due to a very favorable mix, a material increase in the gross margin in Network operations, Network integration and Professional services and an overall better absorption of fixed costs.
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