Write-down pushes Alcatel into E3.1bn net loss
By Raphael Minder in Paris
Published: July 26 2001 07:59GMT | Last Updated: July 26 2001 08:55GMT
Alcatel, the French telecommunications equipment maker, on Thursday reported its first loss in six years as it took a charge of E3.2bn ($2.8bn) to write-down inventory and adjust to a worldwide slowdown in demand.
Alcatel reported a second-quarter net loss of E3.1bn, or E2.74 per share, compared with a profit of E344m, or E0.32 per share, a year earlier.
The loss was slightly worse than what the company forecast at the end of May, just hours after it ended merger talks with Lucent Technologies of the US. Alcatel had then warned that it would report a second-quarter loss of about E3bn, including a E3bn charge related to slowing worldwide demand and restructuring measures.
However, investors were on Thursday relieved to hear that Alcatel was on course to report a full-year operating profit, as well as match last year's level of revenues.
Alcatel said it expected to cut its workforce by 14,000 people by the end of this year - 60 per cent of whom had already left in the first half - as it speeds up efforts to reduce costs and looks to lower its operating expenses by E1bn more than originally planned.
The group has already announced about 5,000 job cuts in the US as well as plans to halve its number of factories. Alcatel had 110,000 employees at the end of 2000, excluding Nexans, the cable business which it recently divested as part of a flotation.
Serge Tchuruk, chief executive, on Thursday said: "As we begin to reap the benefits of the streamlining programmes under way, Alcatel expects to generate positive income from operations in 2001."
Still, Mr Tchuruk warned that he saw no sign of an improvement in the US this year and that the US slowdown was likely to continue to spread to Europe, as witnessed recently in the UK. He also talked of a "lack of visibility" for the sector which made it hard to make a clear forecast.
Alcatel shares rose 6.1 per cent to E17.94 at the start of trading in Paris, recouping some of the recent losses that had seen them fall to their lowest level in almost three years. In recent weeks, bad news from rivals such as Marconi and Lucent had added to concerns that Alcatel was underestimating the problems it was facing.
Philippe Quentin, analyst at CIC-EIFB, a Paris brokerage, said before Thursday's earnings release: "The signal from Marconi makes me think Alcatel is still too optimistic in its previsions. Europe today is seeing the same thing [as the US], except with nine months of delay."
The group also on Thursday confirmed that Krish Prabhu, its highly-respected chief operating officer,was stepping down in order to spend more time at home in Dallas. Mr Prabhu rejected the idea that he was departing when Alcatel needed him most, adding that "my own perception is that the whole sector has bottomed out."
Revenues in the second quarter rose 4.5 per cent to E6.77bn, excluding Nexans. Second-quarter earnings before interest and taxation fell to E136m from E638m a year earlier.
The company's phone networks unit had sales of E3.12bn in the quarter, up from E2.8bn. Optics sales rose to E2.1bn from E1.7bn. The space and components unit had sales of E920m in the quarter, up from E880m |
