Lucent Hits, Alcatel Misses

A year-end merger close is on track.
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Updated from 7:18 a.m.

Lucent

(LU)

rose 6% Tuesday after it beat fiscal fourth-quarter targets and said it believes its merger with France's

Alcatel

(ALA)

is on track to close by year-end.

Murray Hill, N.J.-based Lucent made $371 million, or 7 cents a share, for the quarter ended Sept. 30, flat with the year-ago $372 million, or 7 cents a share. Excluding tax-related gains, earnings rose to 6 cents a share from 5 cents a year earlier.

Sales rose 5% from a year ago and 25% sequentially to $2.56 billion.

Analysts surveyed by Thomson Financial were looking for a 4-cent profit on sales of $2.39 billion. Shares rose 14 cents to $2.48.

"We are pleased to have ended what's been a challenging year with a strong quarter. As anticipated, we posted our highest quarterly revenue period for the year, driven primarily by mobility deployments in North America, and we recorded a gross margin of 44%," said CEO Patricia Russo.

"In fiscal 2006, we essentially maintained our annual U.S. revenue level, given our improved revenue performance in the fourth quarter," said Chief Financial Officer John Kritzmacher. "Outside the U.S., our annual revenues decreased by about $600 million, and as expected, roughly $500 million of the decrease came from the combined revenues for China and to a lesser extent India. Notwithstanding the fiscal 2006 revenue decline, we achieved an annual gross margin rate of 42% and continued to invest in the areas that are critical to our vision of next-generation networks."

Alcatel said its third-quarter earnings fell to 14 cents an American depositary share from 24 cents a year earlier. Sales rose 6.3% from a year ago to 3.3 billion euros ($4.12 billion). Analysts surveyed by Thomson Financial were looking for a 15-cent profit on sales of $4.4 billion.

The company said it made gains in the Internet protocol routing market. But "this strong performance was partially offset by a decline in our wireless revenues, whose annualized growth had averaged 25% in eight successive quarters, and where the evolution toward IP technologies and new video services is still at an early stage. In the emerging countries where the number of 2G greenfield deployment projects is diminishing, we maintained our selective commercial policy, deliberately abstaining from large contracts where risks are high in the medium term."