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Alcatel-Lucent’s (EPA: ALU) surprise increases in shares

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After going through a series of ups and downs, Alcatel-Lucent (EPA: ALU), the telecom equipment group reported its quarterly results this Thursday. The leader of mobile phone technology and the internet saw its shares soar by 9.15% amounting to 2.23 euros. There was a rise in the French CAC 40 index as well of 0.43%. The loss in the third quarter amounted to 18 million euros which was much less than the 54 million euro loss that analyst predicted.

After being adjusted for special factors, the loss made it to 9 million euros. Alcatel-Lucent (EPA: ALU) stated that the recovery program is the company’s last chance and the 18 million euro loss was a form of improvement that the company had made of 182 million euros compared to 2013’s third quarter. The company achieved this position with an improvement of its operating profits and reduction in its restructuring as well as financial costs.

Michel Combes, the chief executive stated that the main target of Alcatel-Lucent (EPA: ALU) was to increase its spare cash in the long term. Results show that the company is improving its underlying profitability. Ever since the merger of Alcatel (the French company) and Lucent (the US group), Alcatel-Lucent (EPA: ALU) has tried to rise back from its crisis in this recovery period. The company made a lot of efforts with this merger by combining resources in order to bring the company to a stable position for both companies to look towards the future.

The group is doing pretty well in Asia. However, its third quarter sales dropped since the previous year by 12% amounting to 3.25 billion euros. Operating profit increased making it to 170 million euros which is 5.2% of its sales from the 95 million euros in the previous year’s quarter. The core networking and access business division worked well on improving the company’s overall performance. Alcatel-Lucent (EPA: ALU) gives a lot of credit to both of these core divisions which helped it pick up pace in the market.

With the new strategy, Alcatel-Lucent (EPA: ALU) is focusing more on various specialized activities, cutting costs and selling assets. The gross margin of the company which was 1.1 billion euros saw a rise to 34% in sales from its previous 32.6% in the same period the previous year. The fixed costs of the group were reduced by about 645 million euros. This was more than half of the cost target in the company’s Shift plan headed by Combes.

Only Asia-Pacific sales rose 22.5% because of the deployment of new mobile telephone service networks in China as well as the strong businesses in Australia and Japan. North American sales dropped by 14% because of the drop in the access division after it had given a strong performance. Another reason was a drop in traditional technologies for services linked with internet communications. The fall of 13.5% in Europe showed how weak the division was in managing services as Alcatel-Lucent (EPA: ALU) reported.

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