PARIS—Alcatel Inc.’s third-quarter net profits tumbled 42 percent as sales of wireless network infrastructure stalled during the quarter, leaving the company with net income of just $194 million after bringing in $334 million a year-ago.
Revenues rose 1.4 percent year-over-year from $4.13 billion in 2005’s third-quarter to $4.19 billion for the same period in 2006.
Serge Tchuruk, Alcatel’s chief executive officer, blamed the earnings’ dive partly on hesitation among Alcatel’s customers to purchase third-generation network equipment before the close of the French company’s acquisition of Lucent Technologies Inc., expected to close by the end of this year.
Sales of wireless gear during the quarter slipped from last year’s 1.372 billion to $1.249 billion.
Tchuruk cited stiff competition among wireless vendors as well as the company’s rising investments in next-generation technology, such as mobile TV and WiMAX, as factors that led to decreased profits.
Furthermore, Tchuruk indicated that Alcatel’s dealings in the Chinese market registered “good growth” while the company’s acquisition of Nortel Network Ltd.’s UMTS radio access business activity is expected to bring in additional business once the transaction is finished at the end of the year.
“Momentum is building for WiMAX adoption, with a total of 15 customers to date,” stated Tchuruk.
Alcatel declined to provide any forward-looking guidance since the structure of the company will significantly change in the coming quarter.
Lucent’s fiscal fourth-quarter results came in above analyst expectations of a 4-percent revenue gain as the company posted revenues of $2.56 billion, up 5 percent from the year-ago $2.43 billion.
However, profits fell flat. Lucent reported net income of $371 million, down slightly from last year’s fourth-quarter profits of $372 million.
Pat Russo, Lucent’s chairman and CEO, explained, “As anticipated, we posted our highest quarterly revenue period for the year, driven primarily by mobility deployments in North America, and we recorded a gross margin of 44 percent.
Russo credited the company’s results to rollouts of CDMA2000 1x EV-DO Revision A and HSDPA solutions during the quarter, along with converting IMS trials into contracts, specifically with KPN, a service provider in the Netherlands. Russo reminded that KPN selected Lucent’s IMS solution to replace its legacy public switched network. The contract also calls for Lucent Worldwide Services to serve as the network integrator in migrating to KPN’s all-IP network, Russo said.
But KPN wasn’t the only IMS deal that brought in revenue, and contracts in other technology units within the company brought in their fair share of sales dollars.
“During the fiscal year, we added 6 customers for our IMS portfolio, announced more than 70 contracts in 25 countries, and saw revenue growth in UMTS, professional services, data, optical and applications,” said Russo. “We also continued to lead the market in CDMA, including the introduction of EV-DO Rev. A to support next-generation services.”
News of the earnings reports pushed Alcatel’s stock up 92 cents to $12.95 per share, while Lucent’s stock fell 17 cents to $2.51 per share.
