Alcatel-Lucent Cuts Dividend

Alcatel-Lucent just reported somewhat disappointing numbers for the quarter with a  few bright spots.

On the negative side, the company reported its largest ever quarterly loss since it was created in 2006. The loss was 2.58 billion euros ($3.74 billion) in the fourth quarter from 615 million euros a year earlier.

Alcatel-Lucent’s market value has plunged 13.5 billion euros since Alcatel bought Lucent Technologies Inc.

On the bright side, sales were expected to be 4.87 biilion euros and came in at 5.23 billion.

The company predicts a full-year operating margin of between 2.5 percent and 5 percent, Chief Financial Officer Hubert de Pesquidoux said on a conference call.

Alcatel-Lucent forecast in June that it would have 1.7 billion euros in annual cost savings after three years, and savings of 600 million euros this year. About 55 percent of the total will come from job cuts and 45 percent from process improvements and areas such as purchasing, according to the company.

In the fixed-line network business, revenue increased 15 percent, while the mobile business boosted sales 26 percent.

Alcatel-Lucent’s convergence unit, which makes products that handle video transmissions via fixed and mobile networks, reported a 4.6 percent drop in sales.

Gross profit, or sales minus the cost of goods, jumped 17 percent to 1.69 billion euros. Profit on that basis had been anticipated to rise 18 percent, based on the estimates.

Estimates for the adjusted results ranged from a loss of 207 million euros to a profit of 409 million euros, as analysts differed on whether to include restructuring costs and writedowns.

Due to the financial uncertainty of the upcoming year, the dividend has been cut.

One wonders if in hindsight the merger was such a good move. Yes, as customer consolidate, vendor consolidation makes sense. But when you merge with a French company you can’t lay off easily and subsequently you run into problems like having costs that are too high.


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