However, the Paris, France-based company’s margins are under pressure as it battles to establish itself in emerging markets such as Brazil, India and Russia, and its shares fell 11.79% to $12.57 in New York on concern about the outlook.
In its fourth quarter to December 31, net income was 139m euros ($180.9m), up from a loss of 314m euros ($408.9m) on revenue 10.7% higher at 3.8bn euros ($4.96bn). For the year, net income was 281m euros ($365.9m), up from a loss of 1.9bn euros ($2.5bn) on revenue 5.7% higher at 12.26bn euros ($15.97bn).
Like other European companies, Alcatel has been hit by the decline in the value of the dollar and says that at constant currencies, sales rose by 9.5bn euros.
Alcatel’s weakness has been its dependence on Europe, which supplies 42% of revenue and its weakness in the North American market that only contributes 15%. But while the cost of establishing a footprint in developing markets has squeezed margins, it pushed up sales in the rest of the world by 19% and the region now contributes 28% of the total.
CEO Serge Tchuruk acknowledges that the company has still much to do in terms of productivity but the past year has seen the loss-making mobile phones and optical fiber businesses hived off in joint ventures while the power systems business has been sold off.
The company’s strength has been a strong position in DSL, where it claims 40% of the world market while in new growth areas such as IP telephony it says that is the biggest supplier to enterprises in Europe.
But in a market where carriers are consolidating at a rapid rate, there will be pressure for similar moves by equipment suppliers. Like Siemens, Alcatel is suffering difficulties in the fixed communications business and sales in 2004 were down 4% to 5.3bn euros ($6.6bn). While it mobile communications operation increased sales 13% to 3.3bn euros ($4.28bn), it too would benefit from being part of a larger operation.
