Momentum 'Clearly in the Market': Alcatel-Lucent CEO
The French telecom equipment maker, Alcatel-Lucent, returned to profit at an operating level in its 2011 first quarter , despite disturbances caused by the Japanese earthquake and tsunami in early March.
“The momentum is clearly there in the market, it is a strong market, and we have very strong results,” Ben Verwaayen, CEO of Alcatel-Lucent, told CNBC in an exclusive interview on Friday.
“The first quarter is always seasonally weak, so the fact that it is up is a very strong sign. The fact that we have a profit is a great start of the year for us.”
The positive adjusted operating income that the company published, at 13 million ($18.9 million) euros, has been a surprise to the market, as the the Dow Jones analysts consensus was forecasting a loss of 68 million euros.
Revenues were broadly in line with expectations at 3.7 billion euros, up 15.2 percent .
These results can be explained by a strong demand for Alcatel-Lucent’s wireless and internet equipment. The growth for IP switches was more than 20 percent up, and even as high as 34 percent up for mobile equipment.
“Look around you, everybody has a smartphone, everybody has a tablet, and that translates into a boom in data and video traffic,” he added.
The company’s results were also boosted by the Chinese market.
“What happened in China is that they go from 2G to 4G in one step,” Verwaayen said. “There is no way that China is going to hold back. China is going to invest, and I think China will be a very strong market this year, and next year, and the year after.”
However, the revenue was down by 22 percent from previous quarter, due to the high seasonality of the telecom industry, where there is a delay between when customers’ budgets are voted, and when the company makes a profit.
This set of results allowed Alcatel-Lucent to confirm its full-year guidance; the company is expected to outperform the telecom market this year with an operating margin of at least 5 percent , Verwaayen added.
All eyes were turned towards car making and chip making companies for this earning season, following the earthquake and tsunami that hit Japan in early March, fearing a supply chain shortage.
“We think we can manage the situation, but that is only possible because it’s been really proactive and with their help,” Verwaayen said. “It’s sometimes difficult to tell what the second wave of implications will be. The supplier of the supplier of your supplier, but I’m pretty optimistic that we can manage it,” he added.
Verwaayen said the Japanese people have done "a remarkable job given the situation they were confronted with.