Alcatel-Lucent reported Q2 revenues of Euro 3,612 million, up 1.9% year-over-year, up 3.7% year-over-year at constant currency.
“We are at the beginning of our journey towards 2015 and cash remains a challenge. Looking ahead, our clear focus will be maintaining a strict and disciplined approach to implementing The Shift Plan across all of its industrial, operational and financial dimensions,” stated Michel Combes, CEO Alcatel-Lucent.
Gross margin for Q2 came in at 31.9% of revenue for the quarter, compared to 31.8% in the year ago quarter and 29.4% in the first quarter 2013. The sequential increase in gross margin mainly resulted from higher volumes and favorable product mix. Operating expenses decreased -4.4% year-over-year on a reported basis and -4.3% adjusted for constant currency.
There was a net loss (group share) of Euro (885) million or Euro (0.39) per share, including restructuring charges of Euro (194) million, an impairment charge of Euro (552) million resulting from the impairment test review of assets carried at the end of the second quarter 2013, using assumptions consistent with The Shift Plan documentation, and Euro (180) million of financial loss, which included Euro (108) million of interest charges, Euro (26) million of net loss on debts repurchased during the quarter and Euro (24) million of pension and OPEB financial component.
Some highlights for Q2:
- Revenues for Networks & Platforms were Euro 3,063 million, an increase of 5.9% compared to Euro 2,891 million in the year-ago quarter and a 12.9% increase compared to Euro 2,713 million in the first quarter 2013. At constant currency exchange rates, Networks & Platforms revenues increased 8.1% year-over-year and increased 12.5% sequentially.
- Revenues for the IP division were Euro 624 million, increasing 20.9% from the year ago quarter and 25.6% at constant currency, driven by strength in edge routers and carrier ethernet switches across all regions, especially in the US and APAC, as well as a return to growth in EMEA.
- The new 7950 XRS platform has a total of 10 wins and more than 20 trials to date.
- Nuage Networks has a number of active trials.
- Revenues for the Optics division were Euro 422 million, a decrease of 7.0% from the year-ago quarter.
- 100G shipments now represent 27% of total WDM line cards shipments in Q2’13, compared to 19% in Q1’13.
- Revenues for the Wireless division were Euro 1,010 million, a decline of 1.1% from the year-ago quarter.
- Strong growth in LTE and RFS was offset by an overall decline in 2G/3G technologies.
- CDMA revenues now represent approximately 20% of wireless revenues, and for the first time were surpassed by LTE revenues, as the US continues to drive growth in LTE.
- Revenues for the Fixed Networks division were Euro 468 million, an increase of 3.3% from the year-ago quarter, reflecting continued strong growth in copper, especially in the US and Europe. This was partially offset by weakness in ONT fiber products, representing now less than 30% of fixed networks products.
- VDSL2 vectoring products are now being used by 13 customers, including 2 new contracts in the second quarter, in addition to be involved in more than 45 trials.
- Revenues for the Platforms division were Euro 262 million, an increase of 23.0% from the year-ago quarter.
- Revenues for the Services division were Euro 285 million, an increase of 22.3% from the year-ago quarter.
- Strong growth continued in Network Build and Implementation (NBI) as well as Integration Services, both of which benefitted from network rollouts in the US.
- Revenues from Focused Businesses decreased -18.3% in the second quarter with declines in both Enterprise and Submarine businesses.
- Revenues in the Managed Services business were Euro 215 million, a decrease of -14.7% compared to Euro 252 million in the year-ago quarter and an increase of 5.4% compared to Euro 204 million in the first quarter 2013.
In June, Alcatel-Lucent outlined a “Shift Plan” aimed at transforming the company from a generalist supplier of networking solution into a specialist provider of IP Networking and Ultra-Broadband Access. The company is targeting Euro 1 billion in reduced sales, general and administrative (SG&A) expenses over the next three years as it makes a decisive in its industrial focus toward high-value equipment and services.
Current business segments outside of this new area of focus include Terrestrial Optics, Submarine, Wireless Transmission, Network Applications, Integration Services for Strategic Industries, Consulting Businesses and OSS/BSS.
Key points of the plan:
- Grow revenues in Core Networking by more than 15%, from Euro 6.1 billion in 2012 to over Euro 7 billion in 2015,
- Lift operating margins from 2.4% in 2012 to more than 12.5% in 2015.
- IP, cloud and ultra-broadband portfolio at the center of operations, including WDM, 100G, IMS and customer experience product lines, as well as the ‘FTTx’ group of fiber-based connectivity technologies serving homes, businesses and other types of premises, vectoring, the 4G LTE mobile wireless access and small-cells.
- Bell Labs will continue to be the company’s innovation engine, with an 8% increase in R&D from 2013 through 2015. IP and Ultra-Broadband Access will represent 85% of R&D investment in 2015.
- Alcatel-Lucent’s intellectual property portfolio will become a dedicated profit center and will adopt an entrepreneurial approach to licensing in order to develop a solid revenue stream from its library of more than 30,000 patents and 16,000 applications.
- On a cash basis, The Shift Plan is expected to be self-funding over the 2013-2015 period. Once the company has clearly demonstrated the successful execution of the Shift plan, it plans to seek a reduction of its debt by approximately Euro 2 billion including through further asset disposals or through access to the equity markets in order to support its long-term strategic goals.
- The company did not announce any further job cuts at this time although reductions are planned.
- Alcatel-Lucent will reduce the number of countries in which it operates from 185+ to 145 countries. It will go from 100+ sales offices to 75 sales offices. It will consolidate warehouse and purchasing locations.
- The company will undertake a 40% cut in real estate and sites, reducing its footprint in non-strategic locations.
- In Manages Services, the company will address its 15 unprofitable contracts.