Cost-cutting and the sale of enterprise software division Genesys pushed vendor Alcatel-Lucent into profit for the first time since its merger over five years ago.

However, Q4 and full 2011 results released on Friday show that the France-based vendor still has a job on its hands to turn the company round.

Q4 revenues were down 12.9 percent year-on-year at €4.1 billion, while full year revenues declined 2.1 percent to €15.3 billion.

On the plus side, A-L saw a net profit of €868 million in Q4, which boosted a yearly net profit of €1.1 billion.

Much of this was boosted by the sale of the company’s Genesys business to a company owned by private equity house Permira for €1.1 billion.

“Overall, this concludes a second year of strong improvement in our results,” commented company CEO Ben Verwaayen (pictured).

Two of the company’s three business units – networks and enterprise – recorded an increase in revenues over the year.

The software, services and solutions division saw a slight decline, despite being much more profitable.

Growth was driven by sales of IP and wireless products, which both saw a year-on-year increase. Sales of optics and wireline products continued their decline, while services remained flat.

From a geographic perspective, growth came from North America, which was up five percent y-o-y. Europe saw revenues decline by 8.1 percent; worryingly sales in Asia-Pac fell 7.9 percent.

As with many of its Europe-based competitors in the telecoms equipment space, A-L is suffering from an over reliance on outdated products in geographies that are experiencing low or negative growth.

In a statement, Verwaayen said that “an innovation pipeline of software assets and breakthroughs in wireless and fixed-line technologies” would help operators to quickly adapt to the continuing explosion of data and content and help A-L's growth path to boot.

Certainly, its lightRadio, vectoring and new carrier cloud and CEM offerings have been well received. However, whether this pipeline will turnaround company revenues remains open to speculation.

Consequently, A-L has been forced to consider alternative strategies. It announced on Friday that it will offer access to its portfolio of 29,000 patents through a licensing syndicate.

“We have chosen to undertake an innovative approach to realizing the value of our world-class patent portfolio, and while retaining ownership of our patents, we seek to expand access to them for a diverse set of industries,” explained Verwaayen.

It will be interesting to see how this initiative plays out and what financial benefits it will bring. In the meantime, A-L has some more pressing concerns.

Verwaayen said the company would make additional savings of €500 million from its cost base during 2012.

It has been widely reported that French union leaders have claimed the company is planning to cut up to 1,800 jobs in Europe.

It will be interesting to see whether A-L goes down the NSN route and sells off more bits of its business – there is no suggestion of this at present, but 2012 looks like being a key year for the company.

As many countries around Europe are finding out, cutting costs alone does not guarantee long-term success and A-L will need to see revenues rise if Verwaayen's turnaround is to be judged a success.

 

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