Alcatel Turnaround Still Looks Alive

For the full year, Alcatel-Lucent posted an earnings per share loss of $0.04 ($0.05 per ADS) on revenues of €13.18 billion ($15.1 billion), compared with an EPS loss of €0.54 on revenues of $13.81 billion (about $15.82 billion) in 2013. Analysts were looking for a loss of $0.01 per ADS on revenues of $16.4 billion.

Excluding one-time items Alcatel-Lucent posted a fourth-quarter profit of €284 million ($385 million), still below an estimate of €304 million.

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The company’s gross margin grew from 33.4% in the fourth quarter of 2013 to 34.7% at the end of 2014, and Alcatel-Lucent has chopped €675 million (about $773 million) out of its fixed costs in the first two years of its turnaround plant.

The networking division raised its revenues by 15% at constant exchange rates and 20% at actual rates. The weaker euro provided a lift for Alcatel-Lucent just as the weaker yen helped out Toyota.

Alcatel-Lucent CEO Michel Combes now has another year left on his three-year plan to turn the company around. Cost cutting has taken Alcatel-Lucent this far, but now sales will have to pick up at a time when networking gear is experiencing lower demand. By the end of this year, Combes and the company’s board are expecting to post an annual net profit.

When the ADSs were trading for less than $1 in late 2012, Alcatel-Lucent looked to be at death’s door. It is still on life support, but it has a reasonable chance of pulling through.

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In the premarket session Friday morning, ADSs traded up about 2%, at $3.74 in a 52-week range of $4.48. Consensus estimates put a price target of around $4.00 on the stock. The company has a market cap of around $10 billion and has been trading about 7.7 million ADSs a day.

On the Euronext, the company’s shares traded around 3.5% higher Friday morning.