Component shortage put damper on Alcatel Lucent's Q1 2010 results
Alcatel-Lucent's (NYSE: ALU) earnings were driven down in Q1 2010 because of an industry-wide component shortage that prevented it from being able to meet product delivery timelines.
Alcatel-Lucent--which reported a quarterly profit only twice since Alcatel purchased Lucent Technologies in 2006--said its Q1 2010 loss was $660.3 million, steeper than the $515.4 million loss it reported in Q1 09. According to Bloomberg, the company's net loss doubled analyst expectations.
The chip shortage could not have come at a worse time as a number of major U.S. service providers, in particular, took their checkbooks out of the drawer to spend on network equipment now that the economic freeze has started to thaw.
"The most common components are in the tightest supply," said Chief Executive Ben Verwaayen, according to Reuters. "We have enough of the high-end chipsets that we build ourselves. But in the more general components, we compete for supply with other industries like cars and consumer electronics, and they are all recovering at the same time as us. That has caused us some headaches."
Alcatel-Lucent's revenue dropped $4.16 billion, a 9.8 percent decrease from $4.61 billion Q1 09. What's more, revenue declined 18 percent from Q4 09. Alcatel-Lucent's main competitors-Ericsson (NasdaqGS: ERIC) and Nokia Siemens Networks--reported a 9 percent drop in Q1 sales.
Although analysts question whether Alcatel-Lucent can pull itself out of this current slump, Verwaayen is confident that the company can turn things around. "We see strong demand returning to some countries and technologies," said Verwaayen. In the U.S., Alcatel-Lucent's prospects were up with a win from Qwest Communications (NYSE: Q) for 100 Gbps capabilities.
Going into 2010, Verwaayen said that Alcatel-Lucent will reach an operating margin of 1 to 5 percent and roughly breakeven on cash flow.
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