Alcatel Swings to $52 Million Profit
Associated Press
Thursday, February 3, 2005
PARIS – Alcatel SA, the French telecommunications equipment maker,
said it swung to profit in the fourth quarter as a year of
restructuring began to show results.
Net profit came in at 40 million euros ($52 million) in the three
months to Dec. 31, after the 524 million euro net loss posted for the
year-earlier period.
Revenue rose 1 percent to 3.81 billion euros ($4.98 billion), and
operating income jumped 18.7 percent to 393 million euros ($513
million).
Alcatel said Thursday it expects “low-to-mid single-digit” sales
growth in 2005 and a “double-digit” increase in earnings per share. It
continues to target a gross margin – operating profit as a share of
revenue – of 10 percent.
The company – which competes with companies like Germany’s Siemens AG
and Cisco Systems Inc. – returned to profit in 2004. Nevertheless,
Alcatel said Thursday it does not plan to pay a dividend this year,
but hopes to for 2005 earnings.
The lack of dividend and cautious 2005 guidance disappointed
investors. Alcatel shares dropped 9 percent to 10.24 euros ($13.37) in
Paris trading.
In the past year, Alcatel has stopped making fiber optics, mobile
handsets and batteries as part of a strategy focused on more
profitable sectors such as those associated with “triple play” – the
use of mobile phones for voice, television and Internet access.
“We are confident that Alcatel is on the right track,” Chairman and
Chief Executive Serge Tchuruk said.
As part of its restructuring, Alcatel has been investing in Asia and
Africa, building mobile networks and strengthening its commercial
activities there. These investments helped deflate the company’s
gross margin in the fourth quarter to 34.4 percent from 36 percent the
year before.
“An aggressive strategy has also been followed in establishing
footprints in certain high potential markets of the emerging world,
accepting temporary losses as an investment for future growth,”
Tchuruk said.
Tchuruk said he saw first-quarter sales growth between 3 percent and 5
percent.
Alcatel’s full-year 2004 net profit stood at 281 million euros
($367.01 million) after a 1.9 billion euro loss the previous year,
mainly on writedowns and restructuring costs. Revenue fell 2 percent
to 12.27 billion euros ($16.02 billion).
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