Alcatel Sees Recovery From 2nd Quarter, Lowers Debt (Update2)
By Molly Schuetz and Jad Mouawad
Paris, Jan. 31 (Bloomberg) -- Alcatel SA, which posted a record loss last year, predicted that phone-equipment sales will begin to recover in the second quarter and said it lowered debt by more than it had predicted.
The Paris-based maker of network gear lost 4.96 billion euros ($4.3 billion) in 2001, Chief Executive Officer Serge Tchuruk said at a press conference. He predicted demand will begin to revive after a further slump in the first three months of 2002.
``The worst is over,'' said Boris Boehm, a fund manager at Nordinvest in Hamburg. ``I bought some more Alcatel shares today because we see a recovery and Alcatel, as a leader, should prosper when it picks up.'' The stock rose as much as 6.9 percent.
Tchuruk is trimming costs by a fifth so the company can break even on quarterly sales of less than 5 billion euros. Alcatel is shedding about a third of its workers and selling nearly half its factories. The company cut debt to 2.7 billion euros at the end of last year, below a 4 billion-euro forecast.
``The pace of debt reduction is well ahead of schedule,'' said Per Lindberg, an analyst with Dresdner Kleinwort Wasserstein, which has a ``hold'' rating on the stock. ``The debt reduction is a concrete point investors can be relieved about.''
Alcatel shares rose as much as 1.19 euros to 18.39. The stock, the biggest gainer on France's benchmark CAC 40 index today, has lost 72 percent in the past year. Bloomberg's European phone-equipment index dropped 52 percent in the same period.
Competing makers of phone equipment also gained. Marconi Plc rose as much as 11 percent, Nokia Oyj advanced as much as 4.3 percent and Ericsson AB gained 5.1 percent.
Global Crossing
``2001 was the year we cleaned up our balance sheet and cut our debt in half,'' Tchuruk said. ``That puts us in a position to take advantage of the rebound in the market when it occurs.''
Alcatel and rivals have been hurt as indebted phone companies such as BT Group Plc focused more on selling assets than expanding networks. Others, like Global Crossing Ltd, are in danger of going out of business. The Bermuda-based operator of a fiber-optic network, which filed for bankruptcy protection this week, owes Alcatel about 40 million euros, the French company said today.
Alcatel had a fourth-quarter operating loss of 368 million euros as demand for undersea optical cables declined. Sales will probably drop 30 percent in the first quarter from the previous three months, the company said. Alcatel stuck with a forecast for an operating profit this year.
``The results starkly highlight the ongoing brutal slowdown of the telecom-equipment industry, with no recovery in sight,'' said Eric Burkel, an analyst at ETC in Paris who rates Alcatel's shares ``reduce.''
Diversified
Tchuruk, who failed to buy rival Lucent Technologies Inc. last year, has concentrated Alcatel's business in the past six years on optics, phone networks and space technology. He's sold businesses making trains and nuclear reactors, as well as a vineyards and a magazine publisher.
Since 1998, Tchuruk has spent more than $17 billion to boost the business through acquisitions, mainly in the U.S. Europe accounted for half the company's sales in 2001; the U.S. for 19 percent and Asia for 13 percent.
``Alcatel's still too diversified,'' said Valerie Cazaban- Levy, who manages $150 million in stocks at Stratege Finance, including Alcatel shares. ``It's not as sharply focused as Nokia, which dominates its market. Alcatel's touched on too many things and is now paying the price for that.''
Unit Breakdown
In the fourth quarter, Alcatel lost 1.5 billion euros, compared with profit of 426 million euros a year earlier. It was the third straight quarterly loss. Sales fell 30 percent to 6.77 billion euros. Excluding the contribution from Nexans SA, the cable unit Alcatel sold last year, sales fell 20 percent.
For 2001, sales dropped 19 percent to 25.3 billion euros. Alcatel last posted a loss in 1995, the year Tchuruk took over.
Fourth-quarter sales at the company's phone network unit fell 24 percent to 2.89 billion euros. The unit, Alcatel's largest, posted an operating loss of 60 million euros compared with a profit of 381 million in the year-earlier period.
Alcatel's optical unit, which includes its undersea cable business, had an operating loss of 291 million euros compared with a profit of 306 million. Sales in the quarter fell 18 percent to 1.87 billion euros.
At its handset and e-business unit, fourth-quarter sales fell 22 percent to 1.13 billion euros. The unit had an operating loss of 20 million euros from a profit of 44 million.
Sales in the fourth quarter at the company's satellite making business fell 13 percent to 1.01 billion euros. The unit had an operating loss of 4 million euros compared with a 104 million-euro profit.
Standard & Poor's rates Alcatel's long-term debt ``BBB,'' two notches above junk, with a negative outlook. It last cut the rating in November.
Alcatel plans to pay a dividend of 16 cents a share, down from 48 cents in 2000. |
