Lucent Technologies has reported profit in its second financial quarter and expects revenue to continue to grow this year.
The company reported earnings of $68m (£39m) for the three months to 31 March, down from the $349m it reported in the preceding quarter, but up from a loss of $553m in the same quarter a year ago.
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Revenue continued its decline, slipping to $2.19bn in the most recent quarter from $2.26bn in the quarter which ended 31 December and $2.4bn a year ago.
Inventory has crept up over the past six months, from $632m on 30 September to $789m on 31 March.
"After several years of dramatic decline, aggregate capital spending is stabilising," said Lucent chairman and chief executive officer Patricia Russo.
"Traditional segments [such as circuit-switched wireline telephony infrastructure] are shrinking but others are growing," she said.
Spending on 3G wireless network infrastructure is likely to grow at 15% or 20% annually through to 2006, and that on next-generation optical networks at 10% a year over the same period, she said.
Lucent is benefiting from the growth in 3G spending, Russo said, with seven of the eight largest network operators in Europe delivering broadband mobile data services over Lucent's PC cards.
The company has also won infrastructure contracts in Spain, and is seeing interest in its CDMA (code division multiple access) wireless equipment for use in the 450MHz band in Eastern Europe.
While revenue in the company's mobility solutions segment slipped to $951m in the quarter, from $1.1bn a year earlier, operating income for the segment rose to $378m from $249m.
The company is also pursuing business in non-traditional carrier markets such as Ethernet over Sonet networking, and voice-over-IP.
This is essential to counter the continuing decline in revenue from its traditional wireline products.
"Wireline is where we see opportunities to grow, in VoIP technology, IP centrex and residential IP," she said.
Peter Sayer writes for IDG News Service