(UPDATE) Telecom-Equipment Maker Alcatel's 1st-Half Profit Hit By R&D Outlays
Dow Jones Online News, Thursday, September 09, 1999 at 10:17
PARIS -(Dow Jones)- Alcatel SA Thursday reported that its first-half
earnings from operations tumbled 21% to 311 million euros ($330
million), largely because of increased outlays for research and
development, but the telecommunications-equipment maker said it is
standing by an earlier forecast that its full-year operating profit will
exceed 1.2 billion euros, compared with one billion euros in 1998.
Analysts anticipated a slump of between 10% and 20% in first-half
operating profit, and Alcatel (ALA) said the decline resulted from an
additional 200 million euros in R&D spending, compared with year-ago
levels.
Net profit was 220 million euros, down sharply from 2.32 billion
euros in the 1998 first half, when Alcatel booked a one-time gain of
2.13 billion euros. Revenue rose 6% to 10.09 billion euros from 9.52
billion euros a year ago.
Combined operating income from its key telecommunications activities
was down, dropping 30% to 107 million euros from 153 million euros a
year earlier. Revenue totaled 6.99 billion euros, compared with a
restated 6.09 billion euros in the year-earlier period.
Still, Alcatel said it remains confident of meeting its full-year
target of operating profit from telecom activities of more than 800
million euros, up from a restated 631 million in 1998 euros.
The division groups Alcatel's networks, Internet and optics,
terminals and handsets businesses.
Operating profit at the Internet and optics division was down 35% to
88 million euros from 136 million euros, weighed down by "substantial"
R&D investments in new-generation optical-transmission products as well
as for recent acquisitions. Sales totaled 2.35 billion euros, against
1.85 billion euros in the first half of 1998.
ADSL high-speed Internet access lines saw better-than-expected growth
over the first-half, and Alcatel Telecom Chief Operating Officer Krish
Prabhu said he sees this trend continuing. "We're planning, roughly
speaking, on this business doubling every year ... and this could
continue very easily for the next four or five years," he said.
The networks division saw operating profit drop 23% to 55 million
euros from 71 million euros a year earlier. However, the company said it
expects the profitability of its mobile-networks activity is growing on
the back of several recent European contracts.
Operating profit from the cables and components operations -
comprising telecom components and energy cables - was 188 million euros
in the first half, down 9.2% from 207 million euros a year earlier. The
company said full-year operating profit for these operations is forecast
around 400 million euros, down from 439 million euros for all of 1998.
Cables and components groups Alcatel's telecoms components and energy
cables businesses. Telecom components was the only business sector to
show a rise in operating profit, advancing 21% to 151 million euros from
125 million euros a year earlier. The company said this reflects
significant growth in its undersea cable and fiber-optic cables for
public-networks businesses. Revenue was little changed at 1.54 billion
euros, compared with 1.55 billion euros a year earlier.
The trend in this sector is increasingly toward high-value-added
products, Alcatel said, such as local-area-network cables and equipment
for mobile-phone networks.
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