TELECOMMUNICATIONS gear maker Alcatel-Lucent said yesterday that its losses shrank in the third quarter, thanks to the lower restructuring charges and it remained on track to achieve financial targets this year.
The company' shares soared nearly 20 percent as investors welcomed the company's reassuring guidance.
The world's largest fixed-line telecom network equipment maker reported a net loss of 40 million euros (US$51 million) in the third quarter, down from 345 million euros a year earlier when earnings were hammered by restructuring charges.
The Paris-based company also said it will undertake a "comprehensive" strategic review of its business aimed at returning profitability, which could include selling a nearly 21-percent stake in defense contractor Thales SA, worth about 1.3 billion euros at current market prices.
"We need to streamline our portfolio," Alcatel-Lucent's recently installed Chief Executive Ben Verwaayen told reporters on a conference call. Results of the review will be announced in early December, he added.
Alcatel-Lucent continued to suffer from falling investment by telecom operators, its largest customers. Sales in this business fell 13 percent in the third quarter from a year earlier to 2.73 billion euros, as the operators' subscriber base continued to shrink and the worsening economy caused telecom carriers in Europe and North America to cut investment.
The company reiterated its outlook for both the overall telecoms equipment market and its own sales and operating profitability for the full year. Sales are expected to fall in the low to mid-single digit percentage range, while operating margin is expected to be in the low to mid-single digit range. The overall market will be flat, excluding foreign exchange effects, Alcatel-Lucent said.
"I think there was an expectation that the company would cut the guidance for the full year, and the company has maintained it, which is seen as quite a positive thing," said Richard Windsor, a telecom analyst at Nomura International in London.
Despite this, Alcatel-Lucent still has a challenge ahead of it to lift profitability in its core business - selling networking gear to operators.