Alcatel's 1st-Quarter Sales Rose 4.4%; Firm Announces BellSouth Pact
Dow Jones Online News, Thursday, April 29, 1999 at 17:25
PARIS -(Dow Jones)- French telecommunications-equipment maker Alcatel
SA Thursday said total first quarter 1999 sales increased by 4.4% to
4.32 billion euros (US$4.59 billion).
Had copper prices remained constant, sales would have increased by
6.0%, alcatel said.
Separately, the company announced a pact with BellSouth Corp.
intended to streamline contract negotiaton between the two companies.
Alcatel (ALA) said first-quarter telecom sales rose 10.6% to 2.88
billion. Sales in the cables and components sector fell 7.7% to 1.53
billion euros, with a 3.6% decrease at constant copper prices.
In the telecom sector, networking segment sales rose 8.3%, reflecting
the impact of the inclusion of DSC in an otherwise soft market for
narrow-band switching and access. Sales in the Internet and optics
segment rose 12.8% and enterprise and consumer segment sales rose 11.7%,
mainly due to strong growth in corporate networks.
In the cables and components sector, telecom components segment sales
fell 5%, with the high growth in submarine and fiber optic cables offset
by a slow market in other activities. Sales in the Energy Cables segment
decreased by 9.9% (3.1% decrease at constant copper prices) due to a
depressed European cable-equipment market not compensated by the growth
in the U.S. business.
"The first quarter is in line with our expectations. Business has
been strong in the Internet and Optics and (in the) Enterprise and
Consumer segments," said Alcatel Chief Executive Serge Tchuruk.
He said he is now seeing the early signs of strength resulting from
the strategy to reposition Alcatel in key growth markets, which should
have a significant impact on earnings in the second half of this year
and beyond.
He said the company is already seeing a turnaround in underperforming
business in mobile and enterprise operations, which should have a full
impact in the second half.
Alcatel said it maintains its 1999 earnings outlook in telecom, even
though the first half results are expected to be lower than last year.
Tchuruk said that, in the Cables and Components business, aggressive
cost reduction actions are under way, "which should permit the sector to
come close to last year's profitability."
Alcatel also announced Thursday that it has signed a world-wide
suppliers contract with U.S. telecommunications group BellSouth (BLS).
The agreement enables Alcatel to sell to any BellSouth affiliates
without having to negotiate separate pacts, while promising cost savings
to the U.S. firm, the companies said.
"When you are selling big ticket items, contract negotiations can be
quite complicated," Alcatel spokesman Niall Hickey said. "This agreement
simplifies the process," he said.
Hickey said partnerships of this sort are increasingly the way in
which Alcatel would like to expand its international sales.
BellSouth units covered by the accord include BellSouth
Telecommunications Inc. and the group's mobile communications units.
The agreement should allow BellSouth to "generate volume-based
savings and reduce the total number of its vendors," the companies said.
BellSouth Executive Vice President Sid Boren said the agreement
"provides a model on how BellSouth is driving out unnecessary costs."
Alcatel USA Chief Executive Officer Krish Prabhu said the company
hopes to sell its growing range of Internet products to the BellSouth
group.
- By Matthew Curtin; 33 (0) 1 4017-1740; matthew.curtin@dowjones.com
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