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Alcatel-Lucent's performance beats estimates

The struggling telecoms company has been hit by stiff competition in recent years.

Alcatel-Lucent has topped analysts’ estimates in the second quarter. Picture:EWN

PARIS - Struggling telecom equipment maker Alcatel-Lucent reported strong growth in its key US market, beating analysts' estimates.

The company also said mobile chip maker Qualcomm would buy a minority stake as part of a research partnership.

In the first full quarter under new Chief Executive Michel Combes, the company posted a quarterly sales rise of 1.9 percent to 3.61 billion euros ($4.78 billion).

Demand for so-called IP products, which help direct data traffic inside telecom networks, grew sharply and pushed up profits.

But recovery at Alcatel-Lucent, which has lost more than $10 billion since it was created through a 2006 merger, will depend in part on whether telecom operators increase overall spending in the coming years to build super-fast mobile broadband, or if they trim budgets elsewhere to compensate.

Alcatel-Lucent will also have to fight it out with its bigger competitors, Nokia-Siemens Networks and Ericsson, for contract wins.

Adjusted operating profit was 46 million euros or 1.3 percent of revenues. Analysts had predicted losses.

Combes said he would seek three to five partnerships like the Qualcomm deal in a bid to increase Alcatel's R&D firepower.

Despite investors' euphoria, the group's second-quarter results were marked by a net loss of 871 million euros caused by a write-down of its sub-scale wireless business.

And Alcatel-Lucent consumed more cash, 248 million euros, in its operations than it generated a perennial problem for the group.

One billion euros of unspecified asset sales and a billion of cost cuts are also slated through 2015.

The deal with Qualcomm, which will be worth roughly 100 million euros in research spending, is to develop miniature base stations known as small cells.

Telecom operators are increasingly layering these tiny base stations on to their networks to boost wireless coverage over a range of 10 to 200 metres.

Meanwhile, Taiwan's HTC Corp said it expects revenue to fall as much as 30 percent in the third quarter compared to the previous three months, far below analysts' forecasts, citing fierce competition in the mid to high-end smartphone markets.

A delayed launch for the much-hyped HTC One this year has highlighted the company's struggles against dominant smartphone makers Samsung Electronics Co Ltd and Apple Inc. at a time when the market for high-end phones is said to be approaching saturation.

HTC said it expects revenue this quarter of $1.7 billion to $2 billion, below an average forecast initially put forward by analysts.

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