Alcatel-Lucent's IP division revenues rise 25 percent to $824M

Alcatel-Lucent (NYSE: ALU) may still be working through the company's restructuring process set by new CEO Michel Combes, but the company's IP division sales continued to be the star performer in the vendor's portfolio, rising over 25 percent year-over-year to $827 million.

Driven by the IP networking growth and gains in the North America market, overall company revenues were $4.7 million, up 1.9 percent year-over-year.

From a regional market perspective, Alcatel-Lucent reported that North America grew the fastest at almost 20 percent, while the Middle East and Africa grew 9 percent. In Asia Pacific, the vendor said weak sales in China were offset by "good traction" in Japan.

One of the major initiatives that Alcatel-Lucent took during the quarter was to implement Combe's "Shift Plan." Under this new program, Alcatel-Lucent will target around $1.34 billion in cost savings and plans to gain another $1.34 billion in unspecified asset sales. It will also focus its efforts on key areas such as IP networking and wireless.

Despite the revenue increase, the vendor suffered a net loss of $1.2 billion, or $.51 a share. The losses included restructuring charges of $257 million from the Shift Plan, an impairment charge of $732 million resulting from the impairment test review of its assets carried at the end of the quarter.

Here's a breakdown of their key units:

  • IP: The IP division's results were once again buoyed by sales of its edge routers and Carrier Ethernet switches, particularly in the United States and Asia Pacific, in addition to new growth in EMEA. The vendor said it is also seeing interest in the combination of its IP and Optical platforms as seen by new customer wins including Wind Telecommunications in Italy and Epsilon in Singapore. Another key area of IP growth is coming from its new 7950 XRS core router platform. While still new to the core routing game, Alcatel-Lucent won a contract with DE-CIX in Frankfurt, Germany and has overall 10 customers are using its core routers. It also has 20 other service porviders trialing the core router platform. In addition to its hardware platforms, Alcatel-Lucent's Nuage Networks software defined networking (SDN) solutions venture has begun a number of active trials with service providers in North America and Europe.
  • Optics: Optical revenues declined 7 percent to $559 million year-over-year. However, it reported that mid-single digit growth in the WDM portfolio, mostly in the United States and APAC. WDM growth partly offset the continued declines in the legacy product lines, which now represent 25 percent of the vendor's optical revenues. One of the key products in the next-gen optical portfolio is the 1830 Photonic Service Switch, which represented 31 percent of the quarter's optical revenues. Finally, it saw that 100G WDM line card shipments now represent 27 percent of total shipments in Q2 2013, up from 19 percent from Q1 2013.
  • Fixed Networks: Driven by growth in its VDSL2 and vectoring platforms, especially in the U.S. and Europe, Fixed Networks division revenues were $620 million, up 3.3 percent year-over-year. Alcatel-Lucent said the growth of the copper-based products were offset by weakness in ONT fiber products, representing now less than 30 percent of fixed networks products. The vendor's VDSL2 vectoring products have been deployed by 13 customers, including 2 new contracts in the second quarter, and are in 45 trials. One of the highlights of the quarter was that it conducted a trial of its Vectoring solution with A1, a subsidiary of Telekom Austria Group, where it delivered speeds of up to 1 Gbps over existing copper.

Shares of Alcatel-Lucent were listed at $2.41, up 21 cents, or 9.55 percent, in Tuesday morning trading on the NYSE.

For more:
- see the earnings release

Special Report: Wireline telecom earnings in the second quarter of 2013

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