Alcatel Lucent Soci
) reported a modest fourth-quarter and strong full-year 2013,
after struggling for almost two years to transform itself into a
For the fourth quarter, the company reported adjusted earnings
of €0.06 per diluted share ($ 0.08) per ADS, which includes
restructuring charges of Euro (105) million, a net financial loss
of Euro (161) million, an adjusted tax benefit of Euro 79
million, and non- controlling interest of Euro (22) million.
Adjusted earnings surpassed the Zacks Consensus Estimate of a
loss of 1 cent.
The company reported earnings (excluding one-time items) of
€0.12 (17 cents) per ADS which was also well above the Zacks
Consensus Estimate of a loss of 1 cent.
Moreover, overall the results were encouraging as driven by
growth in IP and LTE technologies due to key contract wins and
market share gains. In addition, gross margin also improved due
to a favorable product mix and higher volumes. The company's
Performance Program is on target and is achieving the desired
results. Finally, Alcatel Lucent has succeeded in repositioning
and establishing itself as the specialist of IP and Cloud
networking, ultra broadband fixed and mobile access.
In the fourth quarter of 2013, Alcatel posted revenues of €3.9
billion ($5.4 billion), which were flat year over year but up
8.8% sequentially. Revenues fell short of the Zacks Consensus
Estimate of $5.7 billion.
Revenues by Geography
Geographically, North America posted a 1.9% improvement year
over year. However, Alcatel reported strong growth in Asia
Pacific, with revenues increasing 10.2% year over year, driven by
strong network roll-outs in China. However, Europe reported 0.1%
decline in revenues, while revenues from the Rest of World were
Revenues for the
segment decreased 7.4% year on year, but increased 14.7%
sequentially to €1.72 million ($2.36 million). Two of the three
sub-segments reported year-over-year decline in revenues.
Revenues for the IP Routing division were €555 million ($764
million), declining 5.2% from the year-ago quarter and 2.6%
sequentially, at constant currency. For fiscal 2013, sales grew
10.3% at constant exchange rates, reflecting a consecutive
double-digit increase for the third year, driven by demand for
ultra-broadband access technologies, such as LTE, that drove
opportunities within mobile backhaul deployments.
Revenues in the IP Transport division, which includes
terrestrial and submarine optics, were €544 million ($720
million). However, for the full year, revenues declined by 8.8%
year over year at constant exchange rates due to stabilization in
the second half as a result of improving mix within IP Transport
throughout the year.
Revenues in the IP Platforms division declined 5.8% to €543
million ($748) year over year. However, for the full year,
revenues surged 6.2% year over year at constant exchange rates
due to good performance across a number of activities, specially
the IMS and Subscriber Data Management businesses, growing at a
combined 15% rate, driven by the rollout of LTE networks and
Voice over LTE (VoLTE) technology.
Revenue in the
division grew 4.2% year over year during the fourth quarter and
increased 3.5% sequentially to €1.98 million ($2.73 million). Two
of the four sub-segments reported revenue growth during the
Revenues for the Wireless division were €1.2 million ($1.71
million), an increase of 15.0% from the year-ago quarter due to
strong growth in LTE, which in turn was driven by ongoing large
deployments in the U.S. and China.
For 2013, the division reported a double-digit increase in
revenues, with LTE enjoying more than 70% growth year-over-year
and the company's overlay strategy showing continued success,
driven by recent contract wins from China Telecom, Setar in
Aruba, YooMee in Africa, Lazus in Colombia and Osnova in Russia.
Nevertheless, this performance was partially offset by continued
declines in 2G and 3G technologies, particularly CDMA which
represented less than 15% of wireless revenues in the fourth
Revenues for the Fixed Access division increased 2.4% year
over year and 1.7% sequentially to €542 million ($747 million) in
the fourth quarter of 2013. The copper and fiber businesses
continued to benefit from network upgrades to ultra-broadband
technologies leading to strong year-over-year double-digit growth
rates in the fourth quarter. In 2013, this division grew at a
mid-single digit, further emphasizing positive trends in copper
and fiber businesses, notably in the U.S. and Europe, while
legacy technologies reported declines.
Revenues from the Managed Services division were €186 million
($256 million), reflecting a 30.1% decline year over year at
constant exchange rate, due to restructuring efforts in this
In the fourth quarter of 2013, the company recorded €15
million ($20.7 million) of Licensing revenues and € 27 million
($37.2 million) of Intellectual Property disposals.
During the fourth quarter of 2013, revenues for its
segment were €232 million ($319.7 million), reflecting a decrease
of 8.5% year over year but a 2.6% increase sequentially, at
constant currency exchange rates.
Gross margin for the fourth quarter was 3.4.3%, up
approximately 400 basis points (bps) year over year and increased
170 bps sequentially. The year-over-year increase was driven by
favorable product mix, operational improvements and reduced fixed
operations costs, while the sequential improvement mainly
reflects reduced operational costs. Full-year gross margin was
32.2%, improving by 220 bps compared to the prior year.
Exiting the quarter, free cash flow was €363 million ($500
million) excluding restructuring charges. Free cash flow improved
by €119 million ($1645 million).
In Jul 2012, the company announced a Performance Program
primarily targeted at additional cost savings totaling €1.25
billion by the end of 2013. At the end of the fourth quarter of
2013, Alcatel achieved €104 million ($143 million) through fixed
cost saving. For 2013, the company generated savings of €363
million ($482.1 million). Further, management is continuously
repositioning its IP Networking and Ultra-Broadband Access to
derive the desired benefits.
Before the company ended 2013, Alcatel Lucent entered an
agreement for the sale of LGS for approximately $ 200 million.
This apart, following the earnings release, Alcatel Lucent
mentioned that it has received a binding offer from a Chinese
technology investment company, China Huaxin for the 85%
acquisition of Alcatel-Lucent Enterprise.
The transaction is valued at €268 million ($356 million) on an
enterprise value basis (cash-free / debt-free) and is estimated
€237 million ($314.8 million) on an equity value basis (100%).
However, Alcatel-Lucent will retain a minority stake of 15% and
the deal is expected to be signed during the second quarter of
Alcatel currently carries a Zacks Rank #4 (Sell). Other
companies in the industry worth considering at the moment are
Westell Technologies Inc
). While AudioCodes and Westell Carry a Zacks Rank #1 (Strong
Buy) Plantronics holds a Zacks Rank #2 (Buy).
ALCATEL ADS (ALU): Free Stock Analysis Report
AUDIOCODES LTD (AUDC): Free Stock Analysis
PLANTRONICS INC (PLT): Free Stock Analysis
WESTELL TECH-A (WSTL): Free Stock Analysis
To read this article on Zacks.com click here.