Alcatel-Lucent IP routing down 5.2 percent, but Q4 optical transport soars

Alcatel-Lucent's (NYSE: ALU) IP routing results were a bit of a mixed bag in the fourth quarter, declining 5.2 percent year-over-year to $754 million while segment sales grew 10.3 percent for the full year 2013.

One of the key drivers in the IP division portfolio was wireless backhaul.

During the quarter, the vendor secured an agreement to supply its routing platforms to PEG Bandwidth. The service provider is deploying a number of Alcatel-Lucent's IP-based router platforms to support a mix of wireless backhaul, wholesale and enterprise services, including 20 additional mobile switching centers and 31 new Points of Presence (PoPs), such as data centers, carrier hotels and COs where service providers can access bandwidth on an as-needed basis.

Despite the recent dip in IP revenues, wireless backhaul is set to be a major driver for service provider edge router suppliers. According to a recent Dell'Oro Group report, "the demand for these routers is expected to propel the worldwide Service Provider Router market to almost $9 billion by 2018."

Besides the edge router segment, Alcatel-Lucent also saw continued momentum in the IP Core router market, signing new customers during the quarter for a total of 20 customer wins and 20 trials.

IP and Optical Transport, however, rose 14.2 percent sequentially to $840 million with strong sales of its WDM-based 1830 Photonic Service Switch (PSS), which represented 44 percent of its optical revenues in the fourth quarter of 2013, up from 31 percent in the fourth quarter of 2012.

The company continues to ride the 100G wave with over 180 customers, including Verizon (NYSE: VZ), SFR in France and Rostelecom in Russia. Alcatel-Lucent said fourth-quarter 2013 100G shipments represented 28 percent of total WDM line cards shipments, up from 11 percent from the same period a year ago. Beyond 100G, the vendor has completed 400G trials with Australian provider Nextgen.

Fixed Access continued to be a factor in Alcatel-Lucent's wireline results, rising 2.4 percent year-over-year to $734 million due to strong sales of its Fiber to the Home (FTTH) and VDSL vectoring copper-based products. During the quarter, the vendor signed 11 new fiber contracts and it has 17 VDSL2 vectoring customers, including a recent win with Israel-based incumbent telco Bezeq.

From an overall financial perspective, Alcatel-Lucent posted a quarterly net profit of $188 million vs. a loss of $2.1 billion a year ago, when the company was hit with restructuring and impairment charges. While total sales for the quarter fell 4.1 percent to $5.32 billion, the company said year-over-year revenue was flat at constant exchange rates.

In related news, Alcatel-Lucent made progress in selling off non-core divisions by reaching an agreement to sell its Enterprise business to China Huaxin, a technology investment company. The deal values the activities at $365 million, and Alcatel will retain a 15 percent stake in the operations.

Earlier, the vendor sold its public sector division LGS Innovations for $200 million to Madison Dearborn Partners and CoVant.

Shares of Alcatel-Lucent were trading at $4.52, up 37 cents or 8.92 percent, in Thursday morning trading on the New York Stock Exchange.

For more:
- see the earnings release

Earnings summary: Wireline telecom earnings in the fourth quarter of 2013

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