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February 10, 2012

First time profit for Alcatel-Lucent

Alcatel-Lucent has returned a profit for the first time in its existence as a merged company, vindicating CEO Ben Veerwayen’s long term strategy.

By Vinod

Shares on the stock market jumped by 20% as the French-US telecommunications company posted a profit €1bn (£840m) profit, up from a loss of €334m in 2010. This comes despite a revenue fall of 2.1% for the year, on revenues of €15.3bn.

"Overall, this concludes a second year of strong improvement in our results, and leads to the first positive full-year net results for Alcatel-Lucent since the merger," said CEO Ben Veerwayen.

Alcatel and Lucent merged in 2006; the two corporate cultures meant the company went through growing pains for many years. This saw Veerwayen replace CEO Patricia Russo.

Veerwayen said the company’s 2012 will be defined by €500m in cost savings, alongside plans to better monetise the company’s extensive patent portfolio. It also announced that it had offloaded IT company Gensys for US$1.5bn earlier in the month.

"We were operating in a challenging environment in 2011. Looking ahead, we target, in 2012, additional savings of €200m in fixed costs and €300m in variable costs. We will continue to strengthen our portfolio, drawing upon an innovation pipeline of software assets and breakthroughs in wireless and fixed-line technologies such as lightRadio, 100G coherent technology, IP and vectoring – innovations that enable operators to quickly adapt to the continuing explosion of data and content," he said.

The company aims to further boost its operating margin with the goal to produce a solid cash surplus by year end.

Like rival telecommunications equipment company, Nokia-Siemens, it has been feeling the pinch from Chinese rivals, in Europe especially. It has announced that it will be laying off 23% of its workforce. Nokia-Siemens also announced a new scheme to make greater use of its patent portfolio.

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