Alcatel posts $1.4 billion loss

Alcatel CEO Serge Tchuruk expects more pain before company turns to profit

PARIS, France (CNN) -- France's Alcatel has posted a second-quarter net loss of 1.43 billion euros as telecom companies rein in spending.

Analysts polled by Reuters had expected a loss in the range of 210 million to 800 million euros, compared to a loss of 3.12 billion euros in the second-quarter of 2001. Sales fell 37 percent to 4.23 billion euros.

Loss per share came in at 1.20 euros, versus a loss of 2.74 euros a share a year earlier. At the operating level, the company made a loss of 177 million euros, while analysts polled by Reuters had expected an second-quarter operating loss of 235 million euros.

Alcatel, which has planned to axe more than 30,000 jobs, warned last month sales in the second quarter would be practically flat compared with the first quarter, while operating profit would improve as forecast by about 100 million euros, compared with the first quarter.

Europe's biggest telecom equipment maker said there was no sign yet of a market recovery in the second half of the year.

Alcatel -- along with other equipment makers -- has been hit hard by the cash crisis afflicting telecom operators, whose heavy investment in external growth and new technology in recent years has left them with debt mountains and little to spend on new infrastructure.

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"Alcatel is focused on restoring its profit potential in today's adverse environment while preserving its capability to rebound when the market improves," Chief Executive Serge Tchuruk said in a statement released on Thursday.

"Second quarter results reflect ongoing actions as the first-quarter loss was cut nearly in half as the same level of sales."

"Alcatel's ability to withstand the downturn was further evidenced by the 800 million euros positive operating cash flow in the second quarter, which brought net debt to a low of 1.3 billion euros."

"This was again largely the result of a further two billion euros sequential reduction in working capital."

"Alcatel expects markets to stay depressed in the second half of 2002, with no sign of recovery in view."

"Not including the impact of Alcatel Shanghai Bell, the outlook for the second half, with a weak third quarter and a seasonally stronger fourth quarter, is close to the first half in terms of sales, however with significantly improved income from operations," he added.

Credit ratings agencies Moody's and Standard & Poor's have slashed the company's debt to junk bond status, triggering millions of euros in extra interest payments.

"In spite of the downgrades of our credit ratings, we maintain our year end 2002 net debt target at below the year end 2001 level, factoring in some increase throughout the second half," Tchuruk said.

Alcatel, which recently launched a fresh restructuring programme involving thousands of jobs, has said it plans to cut spending so it can break even on sales of less than 4.5 billion euros by the fourth quarter.