In its first quarterly profit since 2001, Alcatel rang up equivalent to $159 million in net earnings. But take note: much of those first-quarter earnings were thanks to the sale of Saft, a battery business, which fetched roughly $298 million. Restatement of last year's operating profits to take account of the battery business disposal arguably makes earnings improvements look better than they should. Alcatel's total revenues slipped 7%, versus the prior year's first quarter, to $3.26 billion.
Going forward, Alcatel upped its guidance, predicting high single-digit sales growth for the year. That makes sense: the company may now be best placed to gain from demand picking up in broadband access equipment and Internet protocol networks, thanks to strong research & development (R&D). The leading broadband access supplier to U.S. Bell operators SBC Communications
Even so, price pressure will likely get stronger. More than ever, operators are eager to strike the best deals. Fierce competition from DSL makers in Asia that sell cheaper products (like China's Huawei Technologies) will weigh down pricing.
Despite soft Q1 fiber-optic sales, there is room for some optimism. There are signs that broadband demand is stretching the capacity cable and DSL networks, prompting operators to consider switching to super-high bandwidth fiber-optic networks. Late last year, SBC Communications chose Alcatel as the lead supplier for an ambitious project to wire up potentially millions of homes with fiber.
Measured against peers Ericsson
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Fool contributor Ben McClure hails from the Great White North. He doesn't own any shares mentioned here.
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