Alcatel-Lucent suffers Q4 loss on writedown

Alcatel-Lucent
reported higher sales but a net loss for the fourth quarter due to a big writedown
in its CDMA (code division multiple access) and IP (Internet protocol) multimedia
services businesses.

The company said revenue rose 18 percent to €5.2 billion on the back of
strong performance at several of its major business units. But despite the stronger
sales the company saw its net profit plunge into the red to the tune of €2.6
billion. This was largely due to the €2.5 billion writedown.

Its wireline and wireless carrier business was strong and revenues were €3.7
billion in the quarter against €3.2 billion during the same period a year
earlier. The company benefited from strong growth in carrier-type optical networking,
and the GSM (Global System for Mobile Communications) and WCDMA (Wideband CDMA)
sectors. Broadband access revenue fell on the back of a decline in the number
of DSL lines delivered.

Revenues were up 27 percent in the services business to €1 billion after
the company won large network operations contracts and worked on IPTV and IP
network integration projects. Its enterprise business segment saw revenues of
€435 million, up about 4 percent, thanks to strong momentum in Europe and
Asia.

The report came with bad news for investors. The company suspended its dividend
payment for 2007 "in the light of these results and or a more uncertain
market outlook," it said.

"We just thought very plainly that it was good financial discipline looking
at both our net income in '07 and the very tough macroeconomic environment,"
said Hubert de Pesquidoux, chief financial officer, on a conference call.

CEO Patricia Russo warned that the company doesn't have a positive short-term
outlook, particularly with a looming recession in the U.S. given Alcatel-Lucent's
dependance on business there.

"There is a level of uncertainty ... that leaves a lot unknown,"
Russo said.

Despite interest in IP networking and 3G broadband services, growth over the
next year is likely to be flat or just slightly up, Russo said. Taking into
account currency differences, the market will likely be down, she said.

Some customers are also pursuing network-sharing arrangements, which could
affect how much those companies spend on their own infrastructure, she said.

Russo defended the 2006 merger of Alcatel and Lucent and said the company is
still trying to reduce costs. So far, about 6,700 employees have been let go
in a restructuring plan that will shed a total of 12,500 employees, she said.

IDG News Service

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