Alcatel-Lucent's Verwaayen: Service providers will start spending again

Alcatel-Lucent (NYSE: ALU) may have had another tough quarter, but that's not dampening the spirits of company CEO Ben Verwaayen who believes that service providers are going to start spending again to fulfill enterprise and consumer bandwidth demands.

Verwaayen believes that an uptick in carrier spending will help it break its earnings slump. Since the company was formed in 2006 through the merger of the former Alcatel and Lucent Technologies, it posted a profit only twice.

Speaking at the Reuters Global Technology Summit in Paris on Thursday, Verwaayen said that wireless and wireline providers aren't simply going to engage in post recession "catch-up" spending, but rather on buying equipment that will enhance their IP network transitions. "They are not just building inventory up in the old stuff," he said.

In addition to WCDMA/LTE-based wireless broadband, Alcatel-Lucent said it is seeing new interest in deploying IP and optical technologies. While Alcatel-Lucent's wireline sales were down in Q1 2010, it did report it was seeing continued demand for broadband access (VDSL2 and GPON) and it won five new contracts for its IMS solution.

Of course, Verwaayen has his work cut out for himself. Following a disappointing Q1, which it attributed to component shortage, financial analysts question whether he can reach his goal of an adjusted operating margin of 1 to 5 percent and break-even on cash flow this year.

Alcatel-Lucent's inability to overcome its financial woes has fueled continued speculation that it will become a potential takeover target to aggressive Chinese rival Huawei. Not only has Verwaayen again dismissed any M&A rumors but reiterated that the company is on the right track to profitability. "I had to deal with complexities as a result of mergers. If I look back where the company spent its energy, it was dealing with complexity," he said. "I wouldn't want to go through that again."

For more:
- Reuters has this article

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