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Alcatel-Lucent Confirms 2010 Outlook; Shares Rise

Chief Executive Officer Ben Verwaayen
Chief Executive Officer Ben Verwaayen is betting network investments by phone operators to accommodate application-rich devices such as Apple Inc.’s iPhone will help Alcatel return to profit. Photographer: Xabier Mikel Laburu/Bloomberg

July 30 (Bloomberg) -- Alcatel-Lucent SA, France’s largest telecommunications equipment maker, confirmed full-year margin targets after posting an operating profit in the second quarter.

The shares surged 11 percent in Paris trading, the biggest gain since Aug. 26 last year. Alcatel, which reported a net loss wider than analysts expected, had an adjusted operating profit of 28 million euros ($36.6 million), reversing a 62 million-euro loss in the year-earlier period.

Alcatel delivered a “solid set of results with steady sales recovery and positive operating margins,” Sebastien Sztabowicz, an analyst at Kepler Capital Markets in Paris, wrote in a note to clients. “Alcatel-Lucent dramatically benefited from its large U.S. clients.”

Chief Executive Officer Ben Verwaayen is betting network investments by phone operators to accommodate application-rich devices such as Apple Inc.’s iPhone will help Alcatel return to profit. The company has lost money in all but two quarters since the 2006 merger of Alcatel and Lucent Technologies, including a 515 million-euro loss in this year’s first quarter that the CEO blamed partly on component shortages.

Alcatel and European rivals Ericsson AB and Nokia Siemens Networks are competing with Chinese companies including Huawei Technologies Co. to roll out so-called fourth-generation wireless networks. Alcatel is supplying the technology to AT&T Inc. and Verizon Communications Inc.

‘Not Over’

Alcatel rose 22.9 cents to 2.297 euros in Paris, giving the company a market value of 5.3 billion euros. The company’s shares have fallen 3.6 percent this year.

In the latest quarter, Alcatel posted a net loss of 184 million euros, compared with a profit of 14 million euros a year earlier. Analysts had predicted a loss of 146.2 million euros.

Alcatel’s sales fell 2.4 percent in the second quarter to 3.81 billion euros, including a 3.4 percent decline in the networks segment, the company said. North American revenue climbed 23.9 percent to 1.49 billion euros, while Asia-Pacific sales plunged 25.6 percent to 641 million euros.

Verwaayen said the shortage of components such as semiconductors that power network equipment, which dogged the company in the first quarter, is continuing.

“It’s not over yet, and you can see that in the overall industry,” he told reporters today in a conference call. “The components industry will not be able to solve this issue within a 90-day period.”

Competitors and chip manufacturers have signalled the shortages. Demand for chips is “very, very strong and we and our competitors are not always able to serve all of the demand,” STMicroelectronics NV CEO Carlo Bozotti said last week.

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

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net.

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