(Telecompaper) Alcatel-Lucent reported improving profitability in the third quarter, helped by an increase in underlying revenues. At constant exchange rates, sales were up 7 percent year-on-year and 3.1 percent sequentially to EUR 3.668 billion, and the gross margin rose to 32.6 percent from 27.8 percent in Q3 2012. Alcatel-Lucent said it was growing in IP routing, terrestrial optics and ultra-broadband access products, with new contracts in all regions signed in the quarter. With EUR 259 million in cost savings achieved in the year to date, the company improved the adjusted operating profit to EUR 116 million or 3.2 percent of revenues, from a negative 3.5 percent a year ago. The net loss was EUR 200 million or EUR 0.09 per share, including restructuring charges of EUR 117 million and a financial charge of EUR 218 million. Free cash flow was still a negative EUR 218 million, and net debt rose to EUR 1.004 billion from EUR 794 million at the end of June. Alcatel-Lucent said Qualcomm made its first purchase of the company's shares on 30 September, as part of their earlier announced small cells cooperation, buying a 0.25 percent stake for USD 20 million. Alcatel-Lucent said it expects strong seasonal activity in the fourth quarter and to exceed the top end of its annual cost savings target of EUR 250-300 million.