Alcatel to cut 20,000 jobs

July 26, 2001 Posted: 0522 GMT

LONDON (CNN) -- Alcatel, Europe's fourth-largest telecom equipment maker, said it plans to axe 20,000 jobs as it posted a loss of more than 3 billion euros.

Second-quarter losses were 3.12 billion ($2.8 billion), or 2.74 a share, compared to a profit of 344 million, or 0.32 a share, in the year-ago period.

The loss had been widely expected after the company warned in May it would take 3.2 billion charge to restructure the business and write down inventory due to overcapacity in the industry.

Telecom operators are cutting back on spending as a U.S.-led economic slowdown spreads to Europe and Asia, crimping earnings at telecom equipment makers. 

Alcatel expects to reduce its workforce – 14,000 employees, 4,000 contract workers, and 2,000 through an outsourcing programme – by the end of the year as part of a move to cut operating expenses by 1 billion. Its rivals, Marconi, Lucent Technologies and Ericsson are also cutting jobs to cope with the slump in profits.

"In uncertain markets, Alcatel's success will hinge on operating flexibility... considerable streamlining is underway at Alcatel to improve flexibility and realign its internal cost structure to the current business slowdown," Chief Executive Serge Tchuruk said.

"As we begin to reap the benefits of the streamling programmes under way, particularly in Q4 (quarter four), Alcatel expects to generate positive income from operations in 2001," Tchuruk said.

Adding to jobs woes across Europe, the continents No. 3 chipmaker Infineon Technologies (FIFX) confirmed it plans to cut 5,000, or nearly 15 percent of its workforce, as demand wanes for chips from mobile phone makers and personal computer companies. Infineon also expects savings of about 1 billion in the next 12 to 18 months.

Alcatel, which called of merger talks with Lucent earlier this year, said in May second-quarter operating profit would be above 100 million and it expected to post a net loss of around 3 billion.

Second-quarter operating profit actually came in at 136 million, down 77 percent from £638 million. Sales fell to 6.8 billion from 7.7 billion in the three months a year ago. Analysts polled by Reuters, forecast second-quarter operating profit, excluding the Nexans energy cable unit sold in June, in the range of 60 and 120 million.

"In the midst of a severe telecom industry re-set that is leaving no participant unscathed, Alcatel has thus far been able to maintain revenue growth and deliver positive income from operations," Tchuruk said.

Shares in Alcatel rose 4.1 percent to 17.60 amid relief the company had not delivered another revision to its outlook.

Concern about worse news had pushed the stock down to a low of 16.73 on Wednesday, its lowest level since October 1998.

The stock is down more than 80 percent from their peak of 97.15 in September 2000.

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