Though Alcatel-Lucent's (ALU +13%) Q3 revenue only grew 1.9% Y/Y (a growth rate that matches Q2's), job cuts helped the company's gross margin rise 480 bps Y/Y to 32.6%. A 5% Y/Y drop in SG&A spend to €514M, and a 3% drop in R&D to €566M, also bolstered Alcatel's bottom line.
Q3 free cash flow was still -€218M, though that figure is better than the year-ago period's -€366M. Net debt rose to €1.004B from €794M at the end of Q2 and €58M a year ago.
A mix shift towards higher-margin router and mobile infrastructure sales also boosted Alcatel's gross margin. Router sales +7% Y/Y to €580M, wireless access +13% to €1.2B. On the other hand, fixed access (broadband equipment) sales only rose 0.7%, optical transport sales fell 1.8%, and IP platform (carrier software) sales fell 3.6%. Managed services, a low-margin business Alcatel has been cutting its exposure to, fell 28%.
North American sales, lifted by strong orders from U.S. mobile carriers, rose 14% Y/Y. Asia-Pac fell 11%, and Europe rose 4%.
Alcatel claims four more customer wins for its 7950 XRS core router, launched last year to much fanfare, raising the total to 14. LTE equipment sales more than doubled Y/Y, providing a lift to wireless access. 2G/3G equipment sales -5% at constant currency.