Alcatel-Lucent Bolsters Profit through Internet Routing

Alcatel-Lucent announced on Friday that its profit for the fourth quarter was increased by rising sales and cost controls at its business of Internet routing that is high margin. That put the company on track for free, positive cash flow for the first time in 2015.

The maker of telecommunications equipment based in Paris reported net profits of $311 million or 8 cents per share in comparison to 5 cents per share profit for the same period last year.

Profitability increased as the business continued to see an increase in sales of its Internet backbone equipment used by clients in Asia, Europe and the U.S. that is much higher margin, which in turn boosted gross margins to over 34.6% from 33.2% one year earlier.

The result gives evidence of progress for CEO Michel Combes who for close to two years has pursued a plan to redirect the resources of the company to just a few areas that are profitable while selling some assets.

Established in 2006, via a merger of U.S. based Lucent Technologies and France’s Alcatel, the business has been eating cash ever since.

Combes plan includes heavy cuts in staffing and a big effort to broaden the customer base of the company.

The Internet routing segment of the company has been a crucial part of Combes’ plan. One of the company’s most profitable, this unit has become the company center of the new core networking group that it calls a top priority.

Combes said that unit managed to represent 15% of the fourth quarter revenue from customers not in the telecommunications business.

Overall revenue during the quarter dropped for last year. Excluding the assets sold, including the enterprise phone sector and its government services division based in the U.S., revenue for the prior year was higher.

The wireless division of the company, its largest, continued to slide slowly with its revenue off by 9% from the same quarter last year.

The company announced that its plans to sell part of its submarine division through a public offering are on track for the second six months of 2015.

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