Smartphones Bolster Alcatel-Lucent’s Profits

Ben Verwaayen, the chief executive of Alcatel-Lucent.Mukesh Gupta/Reuters Ben Verwaayen, the chief executive of Alcatel-Lucent.

5:42 p.m. | Updated

Alcatel-Lucent reported its most profitable quarter ever on Thursday and handily beat market expectations, in large part because of American operators upgrading their networks to handle the smartphone boom.

The French-American company, formed in a merger more than four years ago, posted a profit of 340 million euros ($465 million) for the fourth quarter of 2010. That was a marked improvement from the 46 million euros reported in the period a year earlier, and it beat the average forecast of 236 million euros from analysts surveyed by Bloomberg News.

Revenue was 4.9 billion euros, up 22.6 percent year on year and 19.3 percent up from the previous quarter. Full-year revenue stood at 16 billion euros, 5.5 percent above that of 2009.

The company’s shares gained 18.5 percent in Paris to close at 3.16 euros.

The gains were largely driven by revenue from Alcatel-Lucent’s wireless business in North America, the company said.

“There’s a clear momentum in the market,” Ben Verwaayen, the chief executive, said in an interview. “Everywhere you look, it’s about smartphones. People are communicating in a new way, and this happened in a very short time.”

Big American operators like AT&T and Verizon are increasing capacity, which Alcatel-Lucent expects to grow  3,000 percent by 2015 sector-wide. Smaller players are also expanding as they try to keep up.

Alcatel-Lucent became the biggest telecommunications equipment maker in the world after the $11.6 billion merger of Alcatel, based in Paris, and Lucent Technologies, based in Murray Hill, N.J., in 2006.

After losing billions of dollars and cutting thousands of jobs, the company has only recently begun to deliver on the promises made when the deal was struck.

Mr. Verwaayen, a Dutchman and the former head of the British telecommunications company the BT Group, was named chief executive of the combined company in 2008, after a disappointing performance for its first two years led to the departure of its top executives.

The transformation included shedding tangential parts of the company and expanding divisions like data transfer technology. Explaining last year’s revenue growth, Mr. Verwaayen said, “The old product grew 10 percent. The new product grew more than 70 percent.”

He said he looked forward to the completion of the turnaround. “End of next year, it’s mission accomplished,” he said. “We will be a normal company.”

By normal, he said he meant that “people know what you’re all about. Three years ago, it wasn’t clear. We were a little bit of everything.”

In addition, he said, it meant that Alcatel-Lucent would return to rewarding shareholders, both in terms of dividends and higher share prices.

Vincent Maulay, an analyst at Oddo Securities in Paris, said he was satisfied that the company had made a strategic transition.

He said the results report on Thursday “clearly adds weight to our buy recommendation” and underscored the company’s healthy position, as well as its “potential for an improvement in operating profit in 2011.”