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Alcatel-Lucent makes small profit, stock slumps

Wed, 07/27/2011 - 8:00pm
The Associated Press

PARIS (AP) – Alcatel-Lucent SA said Thursday it made a small profit in the second quarter and expects to hit its full-year earnings targets, but its stock slumped as revenues missed analyst forecasts.

Shares in the French-U.S. technology firm, which have become volatile amid concerns about a sector-wide slowdown, were down more than 8 percent to euro3.10 by mid-morning in Paris.

The telecommunications equipment maker said it made a net profit of euro43 million ($62 million) in the second quarter, better than analysts expected and up from a net loss of euro184 million a year earlier, when earnings were hobbled by hefty restructuring charges.

It cited lower restructuring charges and higher sales of next-generation networking technologies, especially in the U.S. and Asia.

Sales, however, rose only 2.4 percent to euro3.9 billion, below analyst forecasts of over euro4 billion. Growth of over 4 percent in the North America and Asia Pacific regions offset a 2.2 percent drop in Europe.

The company said it is set to achieve a targeted improvement in profitability this year, coming after years of mounting losses from previous management's struggle to merge France's Alcatel with Lucent of the U.S.

Alcatel-Lucent CEO Ben Verwaayen said the company is "on track for the year" thanks to fixed and mobile phone operators' need to upgrade their networks with third and fourth generation technologies with greater bandwidth and speed, as consumers' increasing switch to smartphones drives demand.

Alcatel-Lucent expects to lift its operating margin to over 5 percent of sales this year on an adjusted basis, up from 2.8 percent in the second quarter and 1.8 percent last year.

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