Alcatel-Lucent to cut 5,000 jobs after loss in Q2
Thursday, July 26, 2012
PARIS (AP) — Telecoms equipment group Alcatel-Lucent is to cut 5,000 jobs in a multimillion-euro cost drive after it reported a second-quarter net loss of (euro) 254 million ($308 million).
The Franco-American telecommunications equipment maker unveiled a restructuring plan that it said would take (euro) 1.25 billion off its bottom line by next year.
Shares in the company plunged as the Paris bourse opened, retreating 7.3 percent in early trading. Alcatel-Lucent had reported a second-quarter net profit of (euro) 43 million last year.
The company said the global economic slowdown and heightened competition were hitting profits and that it would exit or reduce operations in markets where it was struggling. It did not specifically name those markets, but it logged the largest decline in revenues in Europe, where sales fell 15.6 percent over the second quarter the last year. The company said that retreat was driven by Western Europe.
Its wireless, optics network applications businesses all also registered steep declines in revenues. By contrast, its IP telephony division that supports movie streaming, video calls and gaming was booming, with revenues growing 16.5 percent over last year.
Alcatel warned last week that it would miss its target of improving on the 3.9 percent adjusted operating margin achieved in 2011. It did not update this guidance.
The Paris-based firm reported revenue of (euro) 3.5 billion for April to June, down 7.1 percent from the same period last year.
While the company has already promised a slew cost cuts, it announced another (euro) 750 million in reductions that will bring its total cuts to (euro) 1.25 billion by the end of 2013. It will achieve those by eliminating 5,000 jobs, ending unprofitable contracts and leaving or reorganizing operations in poor markets.
“It is clear from the deteriorating macro environment and the competitive pricing environment in certain regions challenging profitability that we must embark on a more aggressive transformation,” said CEO Ben Verwaayen. “We are taking aggressive action that will improve our agility in the marketplace while remaining fully committed to both our customers and continuing to deliver world-class innovation.”
Alcatel-Lucent supplies telecommunication carriers such as AT&T, Verizon and France Telecom. It competes with European rivals such as LM Ericsson AB of Sweden and Nokia Siemens Networks of Finland.
But it has struggled to turn a profit since the 2006 merger of France’s Alcatel and Lucent of the United States. Rounds of cost-cutting helped it make 2011 its first full-year profit since the tie-up.