Alcatel-Lucent almost halved its net loss for 2013 as cost-cutting, and new product offerings under Chief Executive Michel Combes begin to take effect. The telecoms equipment maker said its gross margin was 34 per cent and operating profit€307 million both better than expected.

The group posted its first quarterly profit since March 2012 and in the fourth quarter operating margins went to 7.8 per cent from 2.8 per cent in the last quarter of 2012.

Alcatel shares rose 9.5 per cent as investors bought into the operational momentum that Combes has built two quarters into his ‘Shift’ plan, which includes €1 billion in asset sales, €1 billion in cost cuts, and 10,000 layoffs through 2015.

Combes confirmed his target of making the group cash flow positive and sustainably profitable by 2015. Fourth-quarter revenue at €3.93 billion missed analysts’ expectations. Its net loss was €1.3 billion compared with the 2012 loss of €2 billion. Free cash flow was a negative €636 million. It has not been free cash flow positive since the merger that created it in 2006.

Combes’ strategy is to streamline the group to focus on IP networking products.

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