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Demand for Alcatel's telecom equipment grows 7.2%

Alcatel sees demand for its telecommunications equipment returning, with second-quarter sales from continuing operations growing 7.2% year on year, excluding currency fluctuations.

The company highlighted the constant-currency figure for continuing operations as being most indicative of its performance. However, taking into account exchange rate fluctuations, second-quarter sales of €3.08bn (£2.05bn) were up just 3.7% on the comparable figure for last year.

For comparison purposes, Alcatel restated its results for the second quarter of 2003 to exclude its optical fibre, optical components and battery activities, which were discontinued during the year.

Net income for the second quarter rose to €23m from the year-earlier loss of €675m but slipped from a profit of €134m in the first quarter.

Alcatel's fixed-line communications equipment business saw revenue remain stable, but income from operations for the segment rose sharply to €136m from €7m in the year-earlier quarter.

DSL (digital subscriber line) equipment contributed strongly, and optical networking returned to profitability, the company said. The decline in revenue from voice network infrastructure slowed as a greater part of the revenue now comes from ongoing maintenance services.

Operating income from mobile communications also rose, to €48m compared to €10m a year earlier. The company sees growth in the market for EDGE (Enhanced Data for GSM Evolution) and 3G (third generation) mobile network infrastructure, now its main focus.

The company's private communications networks business, selling equipment such as PBXs (private branch exchanges) for enterprise use, generated operating income of €35m for the quarter, compared to €21m a year earlier. Revenue from the segment rose 7% year-on-year to €929m. The segment also includes rail signalling systems, for which there was strong demand in Europe, and satellite construction, where Alcatel was kept busy by an order backlog from 2003.

For the next quarter, Alcatel expects revenue growth at constant currency rates to increase to 10%, with percentage growth for the full year in the high single digits, it said.

Peter Sayer writes for IDG News Service

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