Alcatel-Lucent said Thursday the sale of its Genesys conference calling business helped it turn a profit in the first quarter, but it warned that its underlying earnings were disappointing and that market uncertainties are high.
The Franco-American telecommunications equipment maker posted a net profit of €398 million ($526 million) for the January-to-March quarter, compared with a €10 million loss a year earlier.
The company, based in Paris, said capital gains on its sale of Genesys in February to private equity investor Permira Advisers took it into the black for the quarter.
Underlying profitability was hammered by a double-digit decline in sales of optics and wireless equipment, as well as a steep drop in sales in North America, the company said.
CEO Ben Verwaayen said the gross margin, a closely watched gauge of profitability, "is not at the level we would have liked." He blamed lower revenue, which fell 12.3 percent to €3.2 billion in the first quarter, and weaker margins in its telecommunications services arm.
The overall gross margin fell to 30.3 percent of revenue in the quarter, down from 34.4 percent in the previous quarter. Verwaayen said the company maintains its guidance for improved profitability over the full year, but he said that "market uncertainties remain high in Europe."
Alcatel targets further cost-cutting this year to improve on the 3.9 percent adjusted operating margin achieved in 2011, almost double the year-earlier figure, but well below the 5 percent level that the company had originally targeted.
Alcatel-Lucent supplies telecommunication carriers such as AT&T, Verizon and France Telecom. It competes with European rivals such as LM Ericsson AB of Sweden and Nokia Siemens Networks of Finland.
With North American headquarters in Murray Hill, N.J., it has struggled for years to return to profit. Rounds of cost-cutting helped it make in 2011 its first full-year profit since the 2006 merger of France's Alcatel and Lucent of the United States. Total losses since its trans-Atlantic tie-up topped €9 billion.
The sale of its Genesys conference calling business helped it turn a profit in the first quarter, but it warned that its underlying earnings were disappointing and that market uncertainties are high.