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Alcatel-Lucent Loss Narrows; Shares Drop on U.S. Dependence

Alcatel-Lucent SA’s first-quarter loss narrowed as sales surged in North America. The stock dropped as analysts said France’s largest telecommunications equipment maker needs to improve revenue growth in other markets.

The net loss was 10 million euros ($14.6 million), compared with a 515 million-euro loss a year earlier, the Paris-based company said in an e-mailed statement today.

Chief Executive Officer Ben Verwaayen is nearing the end of a three-year plan to return Alcatel-Lucent to consistent profit this year. The company’s shares have doubled in 2011 on new contracts as mobile-phone companies upgrade their networks on demand for phones that allow users to surf the Web and download music and films.

Alcatel-Lucent’s results may show an overdependence on North America for growth that isn’t sustainable, said Pierre Ferragu, an analyst at Sanford Bernstein in London. The company’s competitors “are doing much better outside of North America,” he said.

Alcatel’s European sales fell 1.8 percent in the quarter. Rival Ericsson AB, the world’s largest network supplier, last month said sales in northern Europe and central Asia climbed 46 percent in the same period, while revenue in western and central Europe declined 8 percent. In China and India, Ericsson’s revenue rose by 74 percent and 38 percent respectively.

Market Underpinnings

Shares dropped 1.9 percent in Paris trading, giving the company a market value of 9.8 billion euros.

The company predicts the current momentum will continue on “strong market underpinnings,” Chief Financial Officer Paul Tufano said in a Bloomberg TV interview.

First-quarter sales rose 15 percent to 3.74 billion euros, led by a 40 percent rise in North America to 1.6 billion euros, where Alcatel is working on fourth-generation wireless networks for clients including Verizon Communications Inc. (VZ)

“The strength in the first quarter was really from wireless in the U.S., and that came through in the results,” said Thomas Langer, an analyst at WestLB in Dusseldorf.

Alcatel-Lucent posted an adjusted operating profit of 13 million euros after a 195 million-euro loss a year earlier.

‘Normal’ Company

“I think we are on our way to becoming a normal company by the end of this year,” Verwaayen said on a conference call. The CEO confirmed the company’s full-year outlook.

Alcatel’s adjusted operating profit will be a key indicator of Verwaayen’s success in the quarter, with a positive result “a possible indicator of a real turnaround,” WestLB’s Langer said before the release.

Telecommunications suppliers are vying for market share as mobile-phone operators upgrade their networks to deal with the data demands of devices such as Apple Inc.’s iPhone. Smartphone shipments will rise 49 percent worldwide this year, led by phones running Google Inc.’s Android operating system, market researcher IDC predicted in March.

Ericsson last month reported a tripling of first-quarter profit as sales rose 17 percent. Huawei Technologies Co., China’s largest phone-network equipment maker, said on April 27 that it aims to more than triple annual sales to about $100 billion in the next five to ten years.

Verwaayen, who has pledged to restore Alcatel to consistent profitability by the end of this year, has shed units including the company’s vacuum technology business, which it sold for 200 million euros last year.

The company is considering options including an initial public offering for its enterprise telecommunications operations, people familiar with the plans said last month.

To contact the reporter on this story: Matthew Campbell in Paris at mcampbell39@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net

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