Alcatel-Lucent's IP routing rises amidst declines in access, IP transport

Alcatel-Lucent (NYSE: ALU) reported that IP routing proved to be a stellar revenue performer, rising 2.2 percent in the third quarter to $749 million, while other segments saw notable declines.

The vendor said the increase in the IP routing segment was driven by what it said was "notable" growth in Europe, Asia-Pacific (outside of China) and the Caribbean and Latin America region.

"We witnessed solid order intake, compared to the year-ago quarter, reflecting encouraging trends in both the Americas and EMEA," Alcatel-Lucent said in the earnings release.

One of the key drivers for the IP router growth was its 7950 XRS IP Core router, which recently raked in four new customer wins, including CenturyLink (NYSE: CTL), China Mobile, China Telecom and China Unicom. In total, Alcatel-Lucent has 32 customers using the 7950 XRS IP Core router platform. What's more, the XRS is being deployed by Denver-based cable company WOW! Business, to deploy an all-IP network in 19 markets.

Despite the gains in IP routers, core networking revenues fell 3.9 percent to $1.82 billion. Likewise, in the access division, revenues fell 7.5 percent to $2.3 billion, due to what Alcatel-Lucent said was "weaker carrier spending and the withdrawal from some loss-making managed service contracts."

From an overall revenue perspective, Alcatel-Lucent reported revenues declined 5.9 percent year-over-year to $4.1 billion, as growth in the Asian LTE market was offset by weaker managed services in Europe and slower equipment sales in North America.

However, the vendor's adjusted operating profit still improved, to $214 million from $142.6 million a year ago, on ongoing cost cuts in the "Shift Plan." Alcatel-Lucent cuts costs by $92 million in the third quarter, a move that helped them achieve cumulative savings of $814 million. Selling, general and administrative expenses were notably down 13.6 percent compared to the same period a year ago. 

Shares of Alcatel-Lucent were listed at $2.97, up 41 cents, in late Thursday morning trading on the New York Stock Exchange.

For more:
- see the earnings release

Special report: Wireline telecom earnings in the third quarter of 2014

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