Alcatel Planning to Reorganize
Core Telecommunications Unit
By DAVID GAUTHIER-VILLARS
Dow Jones Newswires
PARIS -- Alcatel said it would reorganize its core telecommunications
division and replace some top managers after a profit warning in September
triggered a collapse in its share price and damaged investor confidence in the
company.
"The moves are a direct and consistent answer to investors and shareholders
who had the impression [Alcatel's] telecom division was mismanaged," said
Jean d'Anjou, an analyst at Societe Generale.
Alcatel will reorganize Alcatel Telecom into three business groups and transfer
several executives to senior positions at the unit. It appointed Krish Prabhu
senior executive vice president of the division and confirmed that the group
will switch to quarterly financial reporting in 1999.
Analysts said Mr. Prabhu's appointment is likely to focus Alcatel Telecom on
new business opportunities rather than on serving traditional European
corporate clients. Mr. Prabhu, who joined the company in 1984, was
appointed head of Alcatel's U.S. operations in September.
Real Test to Come
Analysts said the initiatives are aimed at strengthening Chairman Serge
Tchuruk's control over the telecommunications division. However, they said,
the real test will be whether the latest maneuver will translate into improved
profits and better communication with investors.
Alcatel shares, which fell 38% after it issued its profit warning, rose 4.3%
Wednesday to close at 629 French francs ($113), up 26 francs.
"The company is willingly addressing its problem at the management level and
that can only be welcomed by investors," said a trader at KBC Securities
France, a brokerage house. The transfer of several executives from the
company's cables and components division to the telecommunications division
is part of Mr. Tchuruk's effort to tighten accounting procedures, analysts said.
Alcatel said Franck Imbert, former financial controller of the cable division,
had been appointed financial controls director of the telecommunications
division.
'A Tighter Ship'
"Imbert and other executives from the cable division are well respected for
their rigorous accounting management. Imbued with Tchuruk's trust, they will
be in charge of running a tighter ship," said Mr. d'Anjou.
Analysts said the reorganization of Alcatel's telecom activities by market
segment should raise the company's ability to adapt its products for the
fast-changing telecommunications sector.
Alcatel said its Networking Business group will be responsible for switching
and mobile infrastructure and for mobile services and network services. The
Access & Transport Business group will deal with transmission, access,
submarine networks and space activities, and a focus on Internet technology.
The Enterprise & Consumer Business group will cover the private networks
and consumer market, comprising voice and data enterprise networks, GSM
and Internet terminals.
Analysts expressed skepticism that Alcatel's shares would rise above 650
francs in the near future, saying that uncertainties weighing on the
telecommunications sector, notably on the demand side, had to be cleared
out.
Separately, Alcatel bought back 2,452,500 of its own shares in October,
French stock market regulator Conseil des Marches Financiers said. The
board approved a 10% share-buyback plan in September. |
