American blessings: ALU Q1 growth driven by U.S. wireless sales

North America is being good to wireless vendors. Like its arch-competitor Ericsson (NASDAQ: ERIC), Alcatel-Lucent (NYSE:ALU) saw a huge boost in North American sales driven by mobile broadband equipment sales. As Verizon Wireless (NYSE:VZ, NYSE:VOD) and AT&T (NYSE:T) rollout massive long-term evolution (LTE) networks and Sprint (NYSE:S) modernizes its CDMA network, North America is becoming ALU’s biggest market.

North American revenues increased from euro 1.11 billion to euro 1.56 billion (U.S. $2.26 billion), surpassing its European sales, which declined slightly--euro $1.12 billion year over year. That North American bump was the major factor in ALU’s overall 15.2% sales growth to euro 3.7 billion and the narrowing of its quarterly net loss to an almost negligible 10 million euros.

Wireless saw the biggest boost increasing, 37% to euro 1.18 billion, but ALU saw growth across most of its major product lines. Optical sales grew 15.3% while its IP business saw a 28.3% jump, reflecting ALU’s recent gains in the router market (Unfiltered: ALU continues to climb in the carrier router market). Services grew 4.8% to euro 809 million, probably due to the several new deployments Alcatel-Lucent has started in the last year.

Wireless infrastructure, however, accounted for nearly a third of all revenue, which ALU attributed to increased sales of CDMA EV-DO and LTE equipment. EV-DO’s strength was a bit of a surprise given all of the attention focused on ALU’s big LTE deployments, but CEO Ben Verwaayen said in ALU’s earnings call today that CDMA continues to be the underlying technology of most North American and many other global operators' voice and 3G data networks .“I think we’ll see CDMA growth for a substantial amount of time,” Verwaayen said.

Sprint began its network modernization program, giving Alcatel-Lucent the rare opportunity to uproot its existing radio access network with a major operator and replace it with next-generation gear that can support LTE and WiMAX technologies as well as CDMA (CP: Sprint lays out vague path to LTE).

Ericsson, which shares in many of the same U.S. contracts as Alcatel-Lucent, saw almost the exact same growth trends. Its North American revenues jumped 39% in Q1, though it emphasized its high-speed packet access (HSPA) contracts over its EV-DO ones (CP: LTE, HSPA, outsourcing drive up Ericsson North American revenues 39%). Even Nokia Siemens Networks (NYSE:NOK, NYSE:SI) saw a 10% bump in sales in region, though its North American presence was still a fraction of its two main competitors. NSN’s North American share is set to increase dramatically, though. Last week, it closed its acquisition of Motorola Solutions (NYSE:MSI) commercial networks business, affirming it as the third largest wireless infrastructure vendor in the region (CP: NSN-Motorola integration begins).

Verwaayen has been trying to bring ALU back to profitability for the last three years, and today’s earnings appear to be one of the final steps toward accomplishing that goal. However, the markets viewed ALU’s strength as its weakness, sending its share prices down due to its overdependence on North America.