Alcatel in Talks to Sell 41 Plants, Distribution Unit (Update3)
By Jad Mouawad and Melissa Pozsgay
Paris, June 29 (Bloomberg) -- Alcatel SA, the French phone- equipment maker whose shares have dropped 59 percent this year, is talking with potential partners to sell half its factories and a distribution unit, Chief Executive Serge Tchuruk said.
Alcatel plans to sell 41 components units, which employ 8,000 workers, and a distribution unit with 6,000 people in Europe. The company is also considering selling a battery-making unit that employs 5,500 workers in 9 factories.
The company plans to exit most of its manufacturing activity to weather a slowdown in demand. Earlier this year, it farmed out its mobile phone production to Flextronics International Ltd. and sold a consumer-electronics businesses to Thomson Multimedia SA.
``Alcatel has been slower in resorting to outsourcing than others,'' Tchuruk said at a press conference following a meeting with employee representatives. ``We won't be closing any sites'' and the move won't result in job losses, he said.
The Paris-based company plans to sell factories in a dozen countries, including France, Germany, Belgium, Italy, Canada, the U.S., Malaysia, China, Sweden, Israel, Brazil and Argentina.
Tchuruk declined to say how much the moves would save or to give a timetable for the sale. ``The main impact isn't to cut costs -- although it does -- but to be more flexible,'' he said.
Alcatel's shares rose 84 cents, or 3.5 percent, to 24.7 euros, valuing the company at about 30 billion euros ($25 billion). Bloomberg's European Telecommunication Equipment index is down 48 percent since the beginning of the year.
Fleeing Manufacturing
Other European technology companies are also fleeing manufacturing as a way to control costs. Royal Philips Electronics NV on Tuesday said it would hand over control of its mobile phone production to a Chinese partner, while Ericsson AB in January farmed out most of its handset production to Flextronics.
Tchuruk said the current plan fits into the company's strategy to move out of production and concentrate its business more into research and development. He said Alcatel had about 250 factories when he took over in 1995, and 200 in 1998. Today, it has about 100. The company has 110,000 employees worldwide.
Alcatel plans to sell factories to contract manufacturers who will keep making products for Alcatel, Tchuruk said. It plans to hold onto plants making undersea networks, satellites and optical equipment.
On Tuesday, Alcatel said it planned to sell most of its plants and keep about a dozen or less. Today, Tchuruk didn't provide precise figures.
Potential buyers for Alcatel's factories include Solectron Corp., Celestica Inc. and Flextronics, analysts said.
Battery Unit
Tchuruk said he's still considering selling the company's battery components unit, Saft, after talks with an unnamed buyer fell apart last year because conditions of the sale weren't satisfactory. He didn't provide a timetable for the sale.
Europe's No. 4 phone-equipment maker, like most of its rivals, has seen sales growth slow this year as phone and Internet companies trim spending. Tchuruk will take a 3 billion-euro charge this quarter to reorganize Alcatel's business, leading to its first loss since 1995.
Alcatel plans to put the units it wants to sell into separate businesses to ease finding partners, Tchuruk told the company's European Workers Council during a meeting held at its Paris headquarters. Union members walked out of that meeting in protest at the sale and because they were not provided details earlier.
Yesterday, in an interview in Europe 1 radio, French Industry Minister Christian Pierret asked Alcatel not to bow to investor pressure and criticized the company for detailing the plans in a Wall Street Journal interview before telling employees or the government.
Opposition
``There are still many uncertainties hanging in this plan,'' said Dominique Campagna, a member of the CGT union who attended the meeting. ``This acceleration of the outsourcing is surprising and we're opposed to it.''
Of the plants cited today, 3 are in France. Alcatel said Monday that Sanmina Corp., which builds electronic equipment for other companies, agreed to buy its manufacturing operations in Richardson, Texas.
In April, Alcatel said it would transfer mobile-phone production to Flextronics to stem losses at its handset unit. Earlier this month, the company agreed to sell its modem unit to Thomson Multimedia SA for 456 million euros and sold its cable unit in an initial public offering.
Earlier this month, Alcatel offered buyouts to 9,000 U.S. workers to try to trim costs. The company has eliminated 2,000 jobs in the U.S. this year. Rival network-equipment makers, including Nortel Networks Corp. and Cisco Systems Inc., have trimmed payrolls by over 70,000 this year. |
