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Merger costs dog Alcatel-Lucent in Q2

Merger costs dog Alcatel-Lucent in Q2

Merger costs, flat sales and a strong Euro led to a net loss in the second quarter at newly formed Alcatel-Lucent SA.

Merger costs, flat sales and a strong Euro contributed to a second-quarter net loss at Alcatel-Lucent.

The newly merged French-U.S. telecom equipment vendor posted an adjusted second-quarter net loss of Euro 336 million (AUD$538 million as of June 30, the last day in the period being reported), compared to an adjusted profit of Euro 302 million in the same period a year earlier.

Second-quarter revenue dipped 4 percent to Euro 4.33 billion, from Euro 4.49 billion the year before.

At constant currency rates, overall revenue would have increased by 0.5 percent compared with the same period a year earlier. Alcatel-Lucent provides the measure to show how it would have performed if not affected by changes in exchanges rates.

The company has called 2007 "a transition year" as it continues to work on its integration.

Alcatel and Lucent Technologies merged last year in a move to fend off growing competition from Asian manufacturers, particularly China's Huawei Technologies Co., as well as Telefonaktiebolaget LM Ericsson and newly merged Nokia Siemens Networks.

But in most areas, the merger has been so far unable to revive sales.

Sales of equipment in the highly competitive wireless infrastructure market, for instance, dipped 8 percent to Euro 1.24 billion in the second quarter, from Euro 1.40 billion a year earlier.

One bright spot was enterprise revenue, including voice and data services to businesses, which increased 5 percent to Euro 376 million, from Euro 368 million.

"We believe that the long-term potential of the merger is strong," Alcatel-Lucent CEO Patricia Russo said in a conference call with analysts, adding that the company is managing a complex transition "in an industry that isn't waiting."

While the company hopes to lower production costs and save money by making better use of combined manufacturing capacities, pricing pressure remains strong, she said.

Russo forecasted strong growth in the second half of the year, fueled in part by growing demand for IP (Internet Protocol) networking technology to deliver "triple play" voice, data and video service, and for optical network systems to carry IP video traffic.

Alcatel-Lucent eliminated 1,900 jobs in the second quarter for a total 3,800 in the first half-year as part of a three-year cost-reduction plan to shed a total 12,500 employees, according to Russo.


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