Alcatel profits aided by U.S. market growth

Steady sales of wireline access communications gear, combined with cost-cutting and the shedding of unprofitable units, helped Alcatel report a net profit of 23 million euros in the second quarter of 2004, a step up from a net loss of 675 million euros a year earlier.

Nearly half of Alcatel’s second-quarter revenue came from fixed communications gear, which, along with Alcatel’s mobile equipment, saw roughly flat sales in the second quarter. However, Alcatel’s private communications segment grew 7% in the quarter to surpass mobile equipment sales by 10%.

North America was Alcatel’s fastest-growing market in the second quarter. Sales there rose 23% from last year’s second quarter to account for 17% of Alcatel’s sales. (In U.S. dollars, the increase was 30%.) Western Europe still represents Alcatel’s biggest revenue source, constituting 43% of its sales, but it has grown only 7% from a year ago. And sales in the Asia/Pacific market (16% of sales) and in the rest of the world (24% of sales) declined 5% and 6%, respectively, despite the fact that sales in China were up 13% in the second quarter.

At 3.078 million euros, the equipment maker’s overall sales were up 3.7% from 2.967 million euros in the second quarter of 2003. Research and development expenditures were up only slightly, from 429 million euros in last year’s second quarter to 433 million euros in the second quarter of 2004.

The company predicted third-quarter sales to be up more than 10% from a year earlier and total sales for the year 2004 to be up in the "high single digits" from 2003. Increased broadband traffic in access networks will feed growth in Alcatel’s metro optical products, said Alcatel chairman and CEO Serge Tchuruk.

"Optical networks have been real drivers after the big collapse of that marketplace," he said. "Whether the [optical] market in itself grows remains to be seen, but it is true that our own [optical equipment] sales do increase because we have a very powerful product line to offer."