One year into “The Shift Plan” Alcatel-Lucent is slowly rebuilding itself. Still loss-making (-€298m) as higher income was offset by the costs of restructuring, it saw Q2 revenues of €3.3bn, growing 0.7% year-on-year at constant exchange rates and comparable areas.
Revenues for the group excluding Managed Services, reflecting the termination or restructuring of loss-making contracts, grew 5.0% year-on-year. This was largely driven by a very strong quarter in wireless, notably with LTE roll-outs in China and US. Gross margin reached 32.6% of revenues in the quarter, improving by 140 basis points year-on-year. This improvement was essentially driven by cost savings.
As reported, the group showed a net loss of €298m. The improvement of €587m compared to Q2 2013 is mainly explained by a -€552m impairment charge in Q2 2013, while higher level of operating income was partially offset by higher restructuring charges and the accelerated amortization of issuance fees ahead of the secured loan repayment, it says.
Commenting on the second quarter results, Michel Combes, CEO of Alcatel-Lucent, said: “I am proud of the very significant improvement achieved in the second quarter which demonstrates the fourth consecutive quarter of consistent delivery under the Shift Plan. With the upcoming reimbursement of the secured loan and the subsequent recovery of the full ownership of its patents, Alcatel-Lucent recaptures the full control of its destiny and can close the first step of its transformation. The Group can now embark on the second chapter of its turnaround story: innovate, transform and grow while keeping intact the commitment of returning to positive free cash flow in 2015.”
Encouraging trends continued in Europe, growing 6% when excluding managed services – where revenues were €77m, decreasing by 62.8%, reflecting a strategy to terminate or restructure loss-making contracts.
The results were hurt by a major reversal for Alcatel's higher-margin core networking business where sales fell 10% Y/Y to €1.37bn, after having risen 6.9% in Q1. IP routing (seen as a growth driver) was down -7% vs. +16.4% in Q1, with tough comparisons blamed; IP transport was down -6.2% vs. +8.6%; IP platforms down -19.2% vs. -6.9% (attributed to attempts to "rationalize" the product portfolio).
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