Landline Equipment Business Boosts Alcatel Earnings

PARIS (AP) -- A sell-off of underperforming units helped Alcatel SA swing to a net profit in the second quarter, the company said Thursday, delivering an upbeat third-quarter revenue forecast boosted by land line and U.S. operations.

The Paris-based telecoms equipment maker said net profit was 23 million euros ($28 million) in the three months ending June 30, compared with a 675 million euro loss in the year-earlier period.

But revenue fell to 3.08 billion euros ($3.71 billion) from 3.15 billion euros, falling short of analysts' expectations of 3.12 billion euros($3.76 billion). Excluding the effect of selloffs, revenues rose 3.7 percent.

Alcatel shares fell 6.7 percent in morning trading before recovering to 10.93 euros ($13.17) by early afternoon -- 1.1 percent below Wednesday's close.

The company said a cost-cutting program and the sale of two unprofitable optical fiber and battery units helped the bottom line. The net loss in 2003 included a goodwill amortization writedown of 115 million euros.Operating profit reached 190 million euros ($229 million) in the quarter versus 12 million euros a year earlier, excluding selloffs.

Alcatel said the improvement was driven by the recovery of its land line communications business, where operating profit surged to 136 million euros ($164 million) from 7 million euros.

In a statement, Alcatel CEO Serge Tchuruk said revenue growth came from landline communication equipment sales -- up 20 percent on the previous year -- and a 30 percent rise in U.S. sales, excluding currency effects.

Tchuruk said he expects sales to grow by over 10 percent year-on-year in the third quarter, assuming a constant euro-dollar exchange rate.

Speaking at a news conference, he added that the growth would be driven by optical equipment, cellular and broadband sales.Tchuruk said Alcatel is ``diversifying its presence in Europe and is making strong progress in developing countries'' in the area of third generation mobile equipment, or 3G -- generally seen as a weak point for Alcatel.

For the full year, Alcatel reiterated its outlook of