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To: IceShark who wrote (24775)	3/11/1999 10:25:00 PM
From: John Pitera	Respond to of 86076

ALA Update for MKC and MMV---- March 12, 1999 France's Alcatel to Cut 10% Of U.S., Europe Work Force By KEVIN J. DELANEY Staff Reporter of THE WALL STREET JOURNAL PARIS-French telecommunications-equipment maker Alcatel SA announced it will cut an additional 12,000 employees in the U.S. and Europe, or 10% of its work force, by the end of 2000, and said operating-profit margins in its telecom division could be lower than forecast. The disclosure came as Alcatel reported 1998 profit of 2.34 billion euros ($2.56 million), in line with the preliminary results it released in January. The figure includes a gain from the disposal of noncore assets and restructuring provisions and compares with profit of 711 million euros in 1997. The announced layoffs, which are on top of the 25,700 positions Alcatel has shed since 1996, come amid Alcatel's high-profile effort to expand into data-networking equipment, which is growing much faster than Alcatel's traditional business of voice traffic. The company has announced more than $5 billion in acquisitions in U.S. networking and telecom-equipment companies since last summer, including the $2 billion purchase of Xylan Corp. and the $350 million purchase of Assured Access Technology Inc. last week. 'Taking Longer Than Hoped' Speaking at a news conference, Chief Executive Officer Serge Tchuruk said Alcatel expects operating-profit margins at its telecom division to be at 7% in 2000, up from 4% in 1998. That is lower than the 8% margin he set for that segment in 1996. "I am still keeping the 8% target in view, but we are taking longer than I had hoped due to the slowdown in the [telecom] switching market," he said. While generally applauding the company's direction, analysts said Mr. Tchuruk's outlook was disappointing given that the 7% target includes recent acquisitions like Xylan, where margins are 15%. "That is definitely on the negative side," said Adnaan Ahmad, a telecom-equipment analyst at Merrill Lynch & Co. in London. On Thursday, Alcatel's stock rose 2.90 euros to 118.50 euros ($129.73) in Paris. There are signs that Alcatel's efforts to transform its business are showing results. As the result of a 75% increase in 1998, Alcatel's operating income from so-called transport and access overtook that of its traditional telecom-networking business. But some analysts cautioned that many of Alcatel's products in this high-growth area, generated by Alcatel's recent acquisitions, won't be available until the end of 2000. Alcatel faces stiff competition from U.S. networking-equipment giants like Cisco Systems Inc., 3Com Corp., and Lucent Technologies Inc. with its January purchase of Ascend Communications Inc. Alcatel's chief financial officer, Jean-Pierre Halbron, repeated that the company's telecom activities should post a 40% rise in operating profit in 1999 from 575 million euros in 1998, while the cables and components division should turn in a steady performance after operating profit of 426 million euros in 1998. He said revenue in 1999 should climb "by a bit more than 10%" from 23.8 billion euros in 1998, and rise another 10% in 2000. Green Light on Framatome Mr. Tchuruk also confirmed that the French government had given Alcatel the green light to divest itself of its 44% holding in Framatome, the French nuclear construction firm. He refused to specify, but Alcatel is said to be considering exchanging that stake for a larger share in Thomson-CSF SA, the French defense electronics firm. Separately, Thomson-CSF, in which Alcatel is a 16% shareholder, said it continues to look for alliances with European companies and partnerships with North American companies. Chief Executive Officer Denis Ranque said he would be "in no hurry" to link up with France's soon-to-be-merged Aerospatiale and Lagardere Group's Matra Hautes Technologies, and suggested that a tie-up with British Aerospace PLC isn't impossible. He also indicated that Thomson-CSF is open to expanding its relationship with Raytheon Co. Thomson-CSF announced a loss of 1.5 billion French francs ($250 million) for 1998, compared with a profit of 2.12 billion francs in 1997. The loss, in line with previous estimates, includes exceptional charges and write-downs of 3.5 billion French francs related to Thomson-CSF's restructuring. Mr. Ranque predicted Thomson-CSF's operating profit will increase by 1.5 billion francs in 2001 as result of the restructuring. Thomson-CSF shares gained one euro to 29.50 euros in Paris trading Thursday.