Alcatel Rises on Profit Forecast, Patents Strategy: Paris Mover

Alcatel-Lucent (ALU), France’s largest telecommunications-equipment supplier, rose the most in a year in Paris after forecasting higher profit margins and announcing a plan to boost cash from its trove of 29,000 patents.

Adjusted operating profit as a percentage of sales will increase from the 2011 level of about 3.9 percent, the Paris- based company said today, while announcing full-year net income of 1.1 billion euros ($1.5 billion), the first annual profit in six years. The shares climbed 18.2 cents, or 12 percent, to 1.68 euros at the close of trading in the French capital, their steepest increase since Feb. 10, 2011.

Last year marked the end of Chief Executive Officer Ben Verwaayen’s three-year strategy to return the company -- formed by the 2006 merger of Alcatel SA and Lucent Technologies -- to a profit. Alcatel-Lucent (ALU)’s plan to license its patents, including fixed-line and wireless technologies, mimicks a strategy rival Ericsson AB adopted as spending by phone operators on gear orders slows and competition with Chinese makers such as Huawei Technologies Co. intensifies.

“We are in a very different position than we were maybe 12 months ago,” Verwaayen said on a conference call. “The aim was to be normal by the end of 2011, and we didn’t meet all of the targets there. But what we are telling you for 2012 is that we are confident.”

Ericsson last month cited slowing spending from North American customers for a slump in quarterly earnings, which sent its stock down 14 percent within a day.

Revenue Declines

Before today, Alcatel-Lucent’s stock had gained 24 percent since the beginning of the year but was still down 44 percent in the past 12 months.

Fourth-quarter net income more than doubled to 868 million euros, helped by gains from some deferred tax assets in the U.S. Sales fell 13 percent to 4.15 billion euros, trailing analyst estimates. Free cash flow was 541 million euros and Alcatel- Lucent targets “strong positive” net cash for 2012.

Alcatel-Lucent had accumulated almost 10 billion euros in losses over five years.

The company, which will offer access to its patents through a licensing syndicate, aims to generate ‘significant” revenue from the rights, Chief Financial Officer Paul Tufano said.

To rebuild the company, CEO Verwaayen has disposed of assets including a stake in the aerospace manufacturer Thales. During the quarter, Alcatel-Lucent agreed to sell its Genesys call-center software unit to Permira Advisers LLP in a $1.5 billion deal.

Cost Cuts

Verwaayen, a former BT Group Plc (BT/A) CEO who took over in 2008, plans to cut an additional 500 million euros in costs this year. Lagging behind rivals such as Nokia Siemens Networks in adjusting its workforce to a tougher environment, Alcatel-Lucent intends to eliminate as many as 1,800 positions in Europe (ALU) through firings and relocation, a union official said yesterday.

About 600 to 700 employees -- some from Italy and Belgium - - are expected to gather tomorrow in front of Alcatel-Lucent’s headquarters to protest a worldwide freeze in salaries.

Rival Nokia Siemens Networks said in November it will eliminate 17,000 jobs, or about 23 percent of its workforce.

To contact the reporter on this story: Marie Mawad in Paris at mmawad1@bloomberg.net

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

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