Alcatel-Lucent (NYSE: ALU) has hatched plans to pursue an initial public offering of shares for its submarine cable business, ending a string of rumors about the future of the division that's been suffering from weakening demand.
The IPO of the submarine cable business is part of its overall drive to exit what it says are low-growth businesses. If the IPO does go through, Alcatel-Lucent would maintain a majority stake in the business, while the IPO would provide resources to expand the business further into the oil and gas market.
Set to take place in the first half of 2015, Alcatel-Lucent said the IPO was designed to "increase its visibility and to optimize capital allocation."
During the quarter, Alcatel-Lucent's submarine business completed a field trial with Apollo, setting what it claims to be a new capacity record of 7.2 terabits per second on a transatlantic system connecting France to the United States.
Rumors about the fate of the submarine cable business have been swirling for over a year. In January 2013, the business caught the attention of France's sovereign fund (FSI), which according to a Reuters report was going to make a bid to purchase the unit.
Besides the submarine business, the Paris-based vendor had mixed results in its core networking, IP routing and access segments.
Core networking segment revenues were $1.82 billion in the second quarter of 2014, down 10 percent from the second quarter of 2013, while IP routing revenues were $751 million in the second quarter of 2014, down 7 percent. Despite the decline in IP routing, Alcatel-Lucent said it is seeing "continuing growth in APAC and steady performance in EMEA."
IP transport suffered a similar trend in the second quarter. Despite seeing gains in the APAC and EMEA regions, particularly for WDM, IP transport declined 6.2 year-over-year to $648 million as next-gen platform sales were not enough to offset legacy declines. Within WDM, Alcatel-Lucent's 1830 Photonic Service Switch (PSS) represented 43 percent of terrestrial optical product revenues in the quarter, up 12 percentage points year-over-year, and it now has over 480 customers.
One of the bright spots in its portfolio was the access segment, where revenues rose 9.5 percent year-over-year to $2.63 billion. It said the year-over-year increase "reflected a continued significant contribution from Fixed Access and improvement in the Wireless division."
Overall second-quarter 2014 revenues were $4.4 billion, up 0.7 percent at constant exchange rates and excluding the impact of divestments.
Shares of Alcatel-Lucent were trading at $3.46, down 38 cents or 9.90 percent, in late Thursday morning trading on the New York Stock Exchange.
- see the earnings release
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