Alcatel-Lucent provides mobile and broadband networking services. Its products and services includes Carrier Ethernet access and aggregation switch, Network Intelligence portfolio, and Consulting Services.
Alcatel-Lucent (ALU) has forged a one-year comprehensive frame agreement worth up to €750M to provide China Mobile (CHL) with technology that will enable the latter to move to an all-IP ultra-broadband network.
The deal includes 4G TD-LTE technology, and will pave the way for "future network functions virtualization (NFV) and cloud-based services."
Alcatel-Lucent (ALU) swung to a net profit of €134M in Q4 from a loss of €1.56B a year earlier, when the company took over a €1B in impairment and restructuring charges.
Revenue dropped 4.1% to €3.93B, below forecasts of €4.18B.
Adjusted operating profit €307M vs €115M, boosted by higher gross margins and cuts in fixed costs.
Operating margin +5 percentage points to 7.8%, an improvement that the company expects to continue.
Alcatel said it is on track to reach its 2015 targets of becoming cash-flow positive and sustainably profitable.
Alcatel is in negotiations to sell an 85% holding in its enterprise phone business to existing partner China Huaxin after the investment company made a binding offer that gives the business an enterprise value of €268M ($362M).
One question might be whether American authorities will approve the sale of the unit, which makes phone systems and other equipment for businesses, given the security concerns that the U.S. has over Chinese telecom gear.
The deal is part of Alcatel's strategy to sell at least €1B in assets as it refocuses on its most profitable businesses.
The reaction to Nokia's (NOK -9.4%) Q4 report is very different from the one that followed its Q3 report, as investors worry about a 22% Y/Y drop in NSN sales (follows a 26% drop in Q3) and a 320 bps Y/Y drop in the division's op. margin to 11.2%. Excluding divestments/contract exits, sales fell 15%.
NSN's mobile infrastructure sales were relatively healthy, dropping 12% Y/Y to €1.56B after falling 26% in Q3. But its services sales fell 22% to €1.54B, nearly on par with Q3's 23% drop.
NSN's sales fell 21% in Europe, 13% in the Middle East & Africa, 23% in Asia-Pac, 38% in North America, and 35% in Latin America. They managed to rise 2% in Greater China (lifted by 4G buildouts).
Also: The Here division (mapping/location services) saw a 9% Y/Y sales drop to €254M, and the Advanced Technologies unit (patent licensing/R&D) saw its sales fall 20% to €121M. However, Nokia predicts the business, which could have more negotiating leverage following the Microsoft deal, will produce €600M/year in sales.
Mobile infrastructure rivals Alcatel-Lucent (ALU -2.4%) and Ericsson (ERIC -1.9%) are following Nokia lower on a down day for equities. Ericsson reports on Jan. 30, and Alcatel on Feb. 6.
Jefferies' Geroge Notter reports Infinera (INFN -11.5%) has lost a $100M Verizon contract for long-haul optical transmission hardware to Alcatel-Lucent (ALU +0.5%). Infinera was considered the favorite to win the deal, which will make Alcatel Verizon's second long-haul supplier. Ciena (CIEN +3.9%) is the other.
Notter reports hearing "pricing was exceedingly low" for the deal, and that this, along with an intervention by Alcatel CEO Michel Combes, helped Alcatel win out even though Verizon's tech people are partial to Infinera's innovative DTN-X transmission platform (previous).
Notter: "The anecdote serves as another reminder that the best technology doesn't always win in the Communications Infrastructure space ... Relationships and pricing can go a long way." Infinera is said to have invested heavily in trying to win over Verizon, which would have acted as a major reference account.
Possibly motivating Alcatel to price aggressively: The company's optical transport sales fell 1.8% YY in Q3, and have been under pressure for a while. Alcatel reports on Feb. 6, and Infinera on Jan. 29.
Three sources tell Bloomberg Alcatel-Lucent (ALU) is in talks to sell its struggling enterprise hardware/software unit to a group of potential buyers that includes Unify GmbH, a JV between Siemens (SI) and P-E firm Gores Group that provides unified communications products for businesses.
The would-be buyers are said to be preparing second-round bids ahead of a possible March decision. One source thinks the Alcatel unit, which had 2012 sales of ~$1B, could sell for €250M ($343M).
Reuters reported in November Alcatel, which has promised to shed €1B worth of assets by 2015, is thinking of selling the business. Last month, the company sold its LGS Innovations unit (provides networking hardware/software for U.S. federal agencies), for up to $200M.
Mobile analyst Chetan Sharma estimates the average U.S. mobile user has consumed 1.2GB/month of data this year, up 74% from a 2012 level of 690MB. Meanwhile, average global mobile data consumption is pegged at 240MB, up 71% from a 2012 level of 140MB.
Sharma also observes data consumption is considerably higher among certain demographics: Swedish mobile broadband subs consume over 7GB/month, and some U.S. Android devices consume over 4GB/month.
Contributing factors: Surging smartphone penetration rates, rapid 4G and (in emerging markets) 3G adoption, growing sales of large-screen smartphones, and the popularity of mobile video services (especially YouTube).
AT&T recently mentioned it's still seeing 50% Y/Y growth in data consumption per smartphone user.
The U.S. has a major lead on many foreign markets in both smartphone and 4G penetration. Thus, the data consumption growth seen in the U.S., along with the capacity crunches and network investments it has spawned, could be a sign of things to come overseas.
Alcatel-Lucent (ALU -1.3%) is selling LGS Innovations, a subsidiary that provides secure wireline/wireless networking hardware, network management/analytics software, and related services to U.S. federal agencies, to an investor group led by P-E firm Madison Dearborn for up to $200M in cash.
Alcatel will be paid $100M up-front, and will receive additional payments (up to $100M) based on LGS' 2014 performance. The deal is expected to close in Q1 2014.
The sale is part of Alcatel's efforts to unload €1B ($1.37B) in assets by 2015. Reuters reported last month Alcatel is thinking of selling its struggling enterprise hardware/software ops, and has hired Lazard to help find a buyer.
During a UBS conference talk, AT&T (T -0.5%) CEO Randall Stephenson promises his company will bring last-mile fiber services to markets other than Austin. AT&T has already responded to Google's Austin Fiber announcement by promising to offer 1Gbps services to residents, but has been light on details.
Stephenson doesn't say where AT&T will offer similar services, but does assert "there are lots of other opportunities around the country," and that "the economics of fiber deployment are really starting to look good in communities like Austin."
Any large-scale residential fiber rollout could require AT&T to ramp its capex, which the company has generally been loathe to do in recent years.
Separately, Stephenson notes AT&T is seeing tough competition in the low-end mobile market; the carrier has lost prepaid share this year, though its Q3 numbers suggest it's turning a corner following the launch of its Aio and GoPhone plans.
Also: In a comment that suggests AT&T (like Verizon) may need to step up its 4G infrastructure spending, Stephenson declares his company is still seeing 50% Y/Y growth in data consumption per smartphone user, thanks to heavy video use.
With AT&T and Verizon ahead of many foreign carriers in seeing large-scale 4G uptake, their data traffic issues could be a sign of things to come. A pickup in mobile capex to address the issue would benefit infrastructure vendors Nokia (NOK), Alcatel-Lucent (ALU), and Ericsson (ERIC), as well as carrier Wi-Fi vendor Ruckus (RKUS).
As predicted by many investors and analysts, Alcatel-Lucent (ALU +3.6%) is returning to France's benchmark CAC-40 index. NYSE Euronext says the telecom equipment giant will be added back on Dec. 23, and replace chipmaker STMicroelectronics (STM -1.2%).
Alcatel, buoyed by a debt restructuring and improving margins, has made fresh 2-year highs today, and is now up 224% YTD. STM, which has been posting Y/Y revenue drops and contending with the unraveling of its ST-Ericsson mobile chip JV, is up 5% YTD, but well off its summer highs.
The NYSE-Euronext committee responsible for handling the CAC-40 is expected to meet next week; it typically judged eligibility based on a company's trading volume and adjusted free-float market cap. Reuters' data indicates Alcatel will have the 30th-largest free-float among French companies once a pending capital raise is finished.