Alcatel-Lucent Delivers on Earnings, Profit Taking Prevails (ALU, CSCO, ERIC)

Alcatel-Lucent SA (NYSE: ALU) has reported earnings showing that its losses narrowed and it confirmed the outlook for 2011 based on stronger North American sales.  The telecom and communications equipment outfit said its net loss was roughly 10 million euros, and -$14.6 millionin dollars, down considerably from a loss of a half-billion euros a year earlier.  Its adjusted profit came to 13 million euros, down from a loss of almost 200 million euro a year earlier.  The estimate used by Dow Jones was a loss of 68 million Euros.  The revenues also improved with a 15% gain to 3.74 billion euros.

What investors are more likely to focus on is the company’s goal for 2011 of a large increase in profitability, and the company is targeting adjusted operating margins of 5% or more.

The breakdown really was North America, where sales were up 40%.  European revenues fell by almost 2% and Asian revenues gained by 1.7%.  Wireless and video are the driving agents today.  The company also noted that its supply chain disruptions from Japan will only be minimal as it took action to mitigate the fallout.

The big consideration is that Alcatel-Lucent shares were already up 80% this year.  It is the turnaround leader so far in networking equipment, and it is at least one of the agents that may be a thorn in the side of Cisco Systems Inc. (NASDAQ: CSCO).  LM Ericsson Telephone Co. (NASDAQ: ERIC) is also gaining steam and its ADRs are up over 30% so far in 2011. 

The company did not really raise guidance, so the early gains seen in overseas trading have turned red.  The ADR closed at $6.26 on Thursday and the 52-week range is $2.25 to $6.63.  It is still far too early to have reliable trading reaction in America but with more than two hours until the market opens those ADRs are trading down about 4% around $5.98 on close to 400,000 shares.

The ordinary shares trading in Paris are down over 4% at 4.11 euros on more than 40 million shares.

• UPDATE at 8:25 AM EST… We see the ADRs trading down 5.75% at $5.90 and we have now seen more than 3 million shares trade pre-market ahead of unemployment.

Profit taking may be the norm today, but we’ll have to wait to see how U.S. market reactions play out after unemployment and non-farm payrolls before passing a final verdict today.

JON C. OGG