Alcatel to Cut 10,000 Jobs; Sees EU5 Bln
2001 Loss (Update2)
By Molly Schuetz
Paris, Oct. 31 (Bloomberg) -- Alcatel SA, Europe's fourth- largest
phone-equipment maker, will eliminate 10,000 jobs in Europe and
forecast a record 5 billion-euro ($4.5 billion) loss this year as
demand for network gear slumps.
``We don't see a rebound for the first half of 2002,'' said Jean-Pierre
Halbron, Alcatel's chief financial officer, on a conference call with
journalists. ``Beyond that, we don't see anything.''
Alcatel, which in May tried to buy Lucent Technologies Inc., is now
shedding a total of 33,000 jobs, or almost a third of its workers. The
Paris-based company had a loss of 558 million euros, or 49 cents a
share, in the third quarter.
Chief Executive Officer Serge Tchuruk plans to slash costs by a fifth
so the company can break even on quarterly sales of less than 5
billion euros, he said at a press conference. Alcatel's sales dropped
18 percent in the third quarter to 5.6 billion euros as phone
companies reined in spending.
Alcatel's shares rose as much as 91 cents, or 5.8 percent, to 16.61
euros, as investors applauded the cost-cutting measures. Before
today the stock had fallen 74 percent this year, making it the worst
performer on the Dow Jones Euro Stoxx 50 Index. The company has
a market value of 19.9 billion euros.
`Right Direction'
``Alcatel is heading in the right direction,'' said Jacques- Antoine
Bretteil, who manages $700 million at International Capital Gestion
in Paris, including Alcatel shares. The cost reductions ``correspond
to what's needed,'' he said.
The additional job cuts will cost 1.2 billion euros this year, leading to
a fourth-quarter operating loss ``similar'' to the 215 million-euro loss
in the third, Tchuruk said. For 2001, the company expects an
operating loss of between 100 million and 200 million euros, he
said.
Fourth-quarter sales will probably rise more than 10 percent from
the third, while full-year sales will be ``a few percent'' below last
year's record level, the company said.
The phone-equipment market expanded in the late 1990s as
investors speculated that new companies would successfully
challenge the former national phone monopolies.
Since then, Alcatel and rivals such as Lucent and Ericsson AB have
seen orders dwindle as the economy cooled and companies
including France Telecom focused on reducing debt. Plunging stock
prices and mounting debt made it harder for smaller companies to
raise money to expand networks.
Rush to Cut
That's led to widening losses at equipment makers and a rush to cut
costs. Lucent is slashing 49,500 jobs, Motorola Inc. 39,000,
Ericsson 22,000 and Nortel Networks Corp. more than half the
94,500 workers it had at the start of the year.
The U.S. telecommunications market has dropped 30 percent this
year, Tchuruk said, with U.S. phone companies cutting capital
expenditures by 15 percent to 20 percent.
The third-quarter loss reported today compares with profit of 297
million euros, or 25 cents a share, in the year-earlier period.
Analysts surveyed by Bloomberg News had forecast a loss of 283
million euros.
An annual loss of 5 billion euros would be the biggest ever for
Alcatel, exceeding its 3.9 billion-euro loss in 1995.
Tchuruk said he expects positive cash flow of ``several hundred
million euros'' in the fourth quarter. He plans to reduce the
company's debt to 4 billion euros by the end of the year from 5.5
billion euros now.
The company may risk another cut in its credit rating because of its
``weak profitability and cash flow generation,'' Louis Landeman, an
analyst at Bear Stearns, wrote in a note to clients.
Moody's Investors Service lowered the company's senior debt rating
two notches to ``Baa1'' last month. Standard & Poor's rates Alcatel
``BBB+.'' Both have a negative outlook on the company.
Worsening Outlook
The company's operating loss compared with an operating profit of
579 million euros in the year-ago period.
The picture was different a year ago, when Tchuruk reported a
tripling in third-quarter profit and forecast sales growth of ``at least''
25 percent for 2001.
By September, Tchuruk warned the impact of the slowdown in the
U.S. economy in the second quarter was ``stronger'' than
anticipated. ``The outlook on the overall market is very weak at best.
We don't expect a turnaround this year,'' he said then.
Rivals are also pessimistic. Ericsson, the biggest maker of wireless
networks, projected no improvement in that market through 2002.
The Swedish company, headed for its first annual loss in more than
half a century, on Friday named a new chairman, Michael Treschow. |
