If investors needed another reason to believe that Lucent's (LU) problems are of its own making and Nortel's (NT) confidence in the optical-equipment market isn't misplaced, then Alcatel's (ALA) third-quarter results Tuesday gave it to them.
The French telecom equipment manufacturer said third-quarter revenue grew 50% from the year before to 7.9 billion euros ($6.6 billion U.S.), compared with expectations of around 7 billion euros. Operating profit for the period grew 109% to 619 million euros, which was higher than the expected 550 million. The company earned 22 cents per American depositary share, up from 8 cents per ADS a year earlier.
Alcatel also forecast that 2001 revenue growth will come in above market expectations
New York Stock Exchange
, the stock was up $5.25, or 9.2%, to $62.38.
The market's reaction to Alcatel's results is very different from how it reacted to results last week from Lucent and Nortel. The shares of network-equipment makers
sold off last week as Nortel failed to match the 150% revenue growth in optical equipment it recorded in the second quarter. This followed Lucent's announcement the previous day that it had failed yet again to meet sales and earnings targets, which resulted in the company sacking its CEO.
Yet Nortel claimed at the time that although sales of optical equipment in the third quarter fell short of the stupendous growth recorded in the previous quarter, the market for optical equipment remained strong.
Alcatel's results appear to bear that out.
, the firm's optical-component unit, said third-quarter revenue grew 173% from the year before to 124.9 million euros, and operating profits rose 253% to 26.6 million euros.
Jean-Christophe Giroux, the head of Alcatel Optronics, said for the full year he expects sales to more than double, and operating profit to more than triple over 1999.
"Optronics was really, really good," said Alok Majumdar, an analyst at
, which has no investment banking relationship with Alcatel and rates the stock a strong buy. "I think there might be an inventory problem in the short term in the optics market but there won't be any real supply-demand problem."
Nortel noted in its results last week that some of its customers were stockpiling equipment on fears that demand for optical equipment would continue to outstrip supply.
, the tracking stock was up 88 cents, or 1.4%, to $61.88.
The one disappointment appeared to be something that wasn't in the results. James Heal, an analyst at
, was hoping for confirmation of a large terrestrial contract for optical equipment in the U.S., but that didn't appear. (Commerzbank has no investment banking relationship with Alcatel.)
The telecom-equipment consultancy
also is largely bullish about the prospects for the optical-equipment market. In a report released Monday, RHK predicted that spending by service providers on optical equipment will grow to $370 billion in 2001 from $306 billion in 2000, a 21% increase.
John Soden, of RHK, noted in the report that "these figures indicate continuing massive growth in spending for optical networking equipment, albeit at a slower year-over-year growth rate than the torrid pace of 2000."