Alcatel-Lucent Results Brighten Global Recovery Prospects

Alcatel-Lucent, the Franco-American marriage that seemed doomed from the start, continues to plod along, and expects to break even this year after a rocky recent past. The telecommunications systems vendor’s results reflects the various markets it serves and tells us a lot about which markets are looking up and which are not.

Looking up:

• Overall revenues declined by almost five percent year compared to last year’s second quarter, but rebounded by nine percent compared to the first quarter of 2009. That’s a good overall sign.
• Wireless revenues declined at a mid-single digit rate, a much lower pace than in the first quarter. The group also said “the momentum in LTE continues to build up,” indicating that carriers are serious about fourth-generation wireless.
• Revenue growth in IP routers “accelerated to the mid-teens,” as well as growth in carrier applications to support rich network usage like voice-over-IP is a good sign for vendors like Cisco and Microsoft, which are betting big on voice and data convergence both in data center and on the desktop.
• Wireless transmission showed “better resilience” thanks to investments in the mobile backhauling segment, also reflecting improved prospects for femtocell vendors and other equipment vendors latching onto the mobile device space.
• The Digital Media & Advertising segment saw double-digit year over year growth, reflecting signs that mobile ad vendors are confident that their customers are switching from traditional venues to digital ones.
• An improvement in revenues from contact center software shows a rebound in the banking sector, which is the company’s principal market for this product.
• Carrier revenues rose almost ten percent sequentially, showing that carriers may have seen the worst of things, but it’s been a bad year overall (see below).

Looking down:

• The carrier segment saw a double-digit decline in revenue, notably as a result of fixed access. Not a good sign for the traditional wireline business.
• A “significant decline in revenues from ATM switching” and re-sales of third-party vendor routers reflects weakness in the traditional carrier segment as well as among large enterprises that typically buy this type of equipment when building enterprise-sized internal networks.
• DSL equipment continued to decline, reflecting the market’s preference for other forms of broadband, including wireless broadband.
• Carrier revenues decreased 16 percent year-over-year, so while carriers are probably rebounding at this point, it’s been a very rough twelve months.