Alcatel reported Q3 sales of EUR 3.039 billion, compared to EUR 3.149 billion in Q2 2003. Year over year, sales decreased by 13% (6% at constant exchange rate). Income from operations amounted to EUR 160 million, while net loss was registered at EUR 284 million or diluted EUR (0.23) per share (US$ (0.27) per ADS). Some highlights of the quarter:
- Fixed communications: Q3 revenue decreased sequentially by 4.6% to EUR 1.341 million. The company cited a strong demand for broadband access, particularly in the U.S. market, during the quarter. A total of 4.3 million DSL lines were delivered in the quarter (10 million shipped in the first nine months versus 5 million in the first nine months of 2002). Alcatel also said its IP services offering is gaining a foothold following the acquisition of TiMetra, while ATM sales were weak for the quarter. Voice networks were adversely affected by the usual seasonality and the activity in both terrestrial and submarine optical networks declined. This mitigated the good performance of broadband access. Significant restructuring continues in the optical network division.
- Mobile communications: Q3 revenue decreased sequentially by 2.3% to EUR 815 million. Mobile networks turned in a good performance in the quarter and continued to gain market share. In addition to ongoing 2G sales, a ramp-up in 3G sales was registered during the quarter. In mobile applications, commercial successes were recorded in convergent payment applications (voice/data and prepaid/postpaid) as well as next generation data messaging software (MMS, MMS premium and instant messaging). Mobile phones continued to be weak with 1.5 million phones delivered during the quarter.
- Private communications: Q3 revenue decreased sequentially by 3.7% to EUR 975 million compared with EUR 1.012 billion. The IP/PBX business enjoyed an increase in demand in Europe. Genesys' contact center software business also continued to turn in a good performance. The rail communication and control business also saw increasing demand in signaling networks for main line and urban rail systems and was a significant contributor to the quarter. The overall strategy to develop outsourcing services for carriers began to pay off during the quarter. The segment's gain was offset by a decline in space revenues, which is attributable to timing effects stemming from the lumpiness of that business. However, order intake for the space business continued to be satisfactory.
- Gross margins: improved to 35.6% , up 4% sequentially and up 8% compared to last year
- Headcount: ended Q3 with 69,000 employees worldwide, compared to 84,000 at the same time last year. Total headcount is expected to be about 60,000 at the end of the year.
- 2004 Outlook: Alcatel said it plans to focus on growth drivers in the carrier market; develop its enterprise business; and develop a complete "solutions approach" for systems integration.
- Serge Tchuruk, Chairman and CEO, said "We are pleased to see third quarter results confirm encouraging indications of our return to profitability. Continuing cost savings and gross margin improvements have translated into reaching our EUR 3 billion quarterly sales breakeven target ahead of schedule."
