Alcatel-Lucent Sees Fastest Growth in IP/MPLS Router Business

Alcatel-Lucent's Q2 revenue increased 2.4% year-over-year and increased 4.4% sequentially to Euro 3.903 billion. At constant currency exchange rates and perimeter, revenue increased 10.4% year-over-year and increased 7.6% sequentially. Reported net income (group share) was Euro 43 million or Euro 0.02 per share.


"We are on track for the year. In the second quarter, our next-generation product sales increased sharply, delivering market share gains in IP and optics, driven by the need for capacity and all-IP network transformation. From a geographic standpoint, we enjoyed significant growth in North and Latin America as well as in Asia Pacific. We have strengthened our focus on innovation by realigning our management team and sharpening our strategy further. We have accelerated actions on fixed costs and reduced internal complexity. Free cash flow improved by more than Euro 300 million in the first half of the year compared to the year ago period and throughout the company we are actively driving better working capital management for the remainder of the year.


"We are reaffirming our full-year outlook to grow faster than our addressable market with an adjusted operating margin above 5% of our 2011 sales," stated Ben Verwaayen, CEO.


Some highlights from the company's Q2 report.


Networks


Revenues for the Networks segment were Euro 2.475 billion, an increase of 7.4% compared to Euro 2.304 billion in the year-ago quarter and an increase of 2.4% compared to Euro 2.418 billion in the first quarter 2011. At constant currency exchange rates, Networks revenues increased 14.1% year-over-year and increased 5.8% sequentially.


The IP division registered its third consecutive quarter of growth in excess of 25% in the second quarter, with an increase of 27.7% from the year-ago quarter to Euro 406 million. Within the division, growth was once again driven by the IP/MPLS service router business, where revenue growth continued at last quarter's near-40% pace. Growth in the Americas region remained strong and was joined this quarter by very strong growth in the Asia Pacific region.


Revenues for the Optics division were Euro 645 million, an increase of 3.7% from the year-ago quarter that was driven by double-digit growth in the submarine business and by continued growth in WDM and wireless (microwave) transmission segments.


Revenues in the Wireless division increased 5.7% from the year-ago quarter to Euro 1.079 billion. At constant currency exchange rates, wireless revenue increased 14.8% year-over-year. Gains were led by CDMA EV-DO business in the Americas, by our 2G and 3G businesses in the Asia Pacific region and by our 4G LTE business.


Revenues in the Wireline division slipped 2.5% below their year-ago level, to Euro 357 million, but they increased 3.6% at constant currency exchange rates. Growth was strong in the Asia Pacific region, led by fiber access business. The IP-DSLAM business was stable, and the legacy TDM switching and legacy DSL businesses declined.


APPLICATIONS


Revenues for the Applications segment were Euro 486 million, a decrease of 0.6% from Euro 489 million in the year-ago quarter and an increase of 7.8% compared to Euro 451 million in the first quarter 2011. At constant currency exchange rates, Applications revenues increased 4.7% year-over-year and increased 10.2% sequentially.


Network applications revenues of Euro 200 million increased 6.4% from the year-ago quarter in the second quarter, marking a fifth consecutive quarter of year-over-year growth. The increase was led by strong growth in Digital Media & Advertising, Messaging and the Motive solution (remote customer management).


Revenues in the Enterprise applications business decreased 6.6% from the year-ago quarter, to Euro 285 million in the second quarter 2011.


SERVICES


Revenues for the Services segment were Euro 871 million, a decrease of 1.4% compared to Euro 883 million in the year-ago quarter and an increase of 7.7% compared to Euro 809 million in the first quarter 2011.


Growth picked up in the Managed and Outsourcing Solutions business in the second quarter with revenues increasing more than 20% from the year-ago quarter.


Revenues in the Network and Systems Integration (NSI) business increased at a single-digit rate in the second quarter, with continued strong growth in network transformation projects. Growth was particularly strong in the Americas.


Revenues fell at a double-digit rate in the second quarter in the Network Build & Implementation (NBI) business (which is focused on civil works) reflecting the continued impact of political unrest in North Africa and the Middle East, as well as project closeouts.


Revenues in the Maintenance business also fell in the second quarter, with declines in both "product-attached" maintenance (the maintenance of Alcatel-Lucent products) and in multi-vendor maintenance. The decline in product-attached maintenance was due to weakness in the EMEA region, which offset gains in the Americas and the Asia Pacific regions. Lower multi-vendor revenues reflect a strategic repositioning within certain projects. http://www.alcatel-lucent.com