Alcatel results

Alcatel announced 1Q06 net profit of €104m, down 16%, on revenues of €3.1bn, up 18%. The operating profit is up 85% to €198m, while gross margin was at 35% and operational margin at 6.5%. The wireline unit reported a 29% increase in revenues to €1273m and doubling its operating income to €110m. Revenues were strong in the access, optical and IP carrier data activities. Mobile infra sales grew 15% to €908m, but operating income declined 14% to €57m, hit by pricing pressure. The Private sector reported sales of €905m, up 7%, and operating income up 41% to €48m. W. Europe accounts for 40% of sales, NA for 20%, Asia for 13% and ROW for remaining 27%. Alcatel had €4.7bn in cash and marketable securities.

The results are mixed: they are ahead of analysts expectations on sales and operating margins, but below on margins hit by higher costs. Net income decrease can be explained by a high level of exceptional income in 2005. In addition, guidance for the end of the year are not enthusiastic: a market growth of 5% meaning rest of the year growth will be low, Alcatel sales growth slightly above, and a confirmed target of improved operational margin, meaning execution in the three next quarters needs to be perfect. As a result, Alcatel share fell between 6% and 7% Thursday.