The Nokia deal could const rain Alcatel-Lucent’s revenue growth in coming quarters as customers hold off on spending, but any impact will be minimum, the Franco-U.S. vendor’s CEO said on Thursday as he presented a solid set of Q1 financials.
"There is a bit of overlap in some of our product roadmaps," and as a result a small number of customers could postpone buying decisions until Nokia and Alcatel-Lucent "confirm one or the other product," said Michel Combes on the vendor’s results call.
"That might impact a bit our revenue growth," in the coming quarters, he said.
However, Alcatel-Lucent has made a concerted effort to optimise its cost structure, and therefore "whatever happens we will be able to cope with," Combes said.
In addition, the firm aims to mitigate any issues by moving as fast as possible to close the Nokia deal, he said. It will be completed in the first half of next year at the latest, if not sooner, he said.
Alcatel-Lucent turned in a strong performance in the first three months of 2015 – "the last unaffected quarter" before the Nokia takeover announcement, Combes said – and its numbers were better received by the market than those posted by Nokia and rival Ericsson.
Combes was reluctant to comment on other companies’ numbers, pointing out that there is seasonality in all results and Alcatel-Lucent benefited from that in Q1.
The firm posted revenues of €3.24 billion, up 9% on the year-ago quarter but down 4% based on constant exchange rates. Adjusted operating income more than doubled to €82 million, while net loss improved slightly to -€72 million.
"Q1 was solid, though not an easy one," Combes said.
In particular, he highlighted a "slower spending environment in North America," although this was in part offset by LTE investments in China.
Verizon, AT&T and Sprint all recorded lower capex in the first quarter than they did a year ago, but they have committed to a certain level of full-year investment, therefore "we foresee an inflection in the second half of the year," Combes said.
"This year will be backloaded whereas the previous year was frontloaded," he said.
Similarly, the firm was affected by a major Japanese customer freezing capex, but "we have good reason to think this will be unfrozen in the second half of the year," Combes said. Essentially, operators will have to spend more to address the ever-growing demand for data, he explained.
Alcatel-Lucent reiterated all its targets for the full year, focusing in particular on its goal of reaching a positive free cash flow position.
"Fixed cost savings remain at the forefront of our priorities and will deliver the €950 million target," this year, said Alcatel-Lucent’s chief operating officer Philippe Guillemot.
The company’s cumulative fixed cost savings reached €668 million in Q1.
That cost-cutting target forms part of the turnaround plan Combes initiated in 2013. The so-called Shift Plan, now in its third and final year, is progressing well, Guillemot said, with many of its projects now ticked off.
"We still have two projects to complete," Guillemot said.
"These projects are on track and will not be derailed by the Nokia-AlcaLu announcement," he said.
