Alcatel arm slashes 25% of workforce

Catherine Bremer

PARIS: Alcatel Optronics, the optical components unit of telecoms equipment

maker Alcatel, said on Wednesday it would slash a quarter of its workforce by

year-end as it struggles with a stubborn market downturn.

In another signal that suppliers to the telecoms industry see no sign of a

rebound in demand, Optronics said it would book a charge of 60 million euros in

the second quarter as it cuts its headcount to 1,350 from 1,805 at end-March.

Only last month parent Alcatel, which is in the process of shedding 30,000

jobs, said it saw no tangible signs of an end to the two-year-old slump in the

telecoms sector, where spending on equipment has virtually dried up.

Another Alcatel offshoot, Nexans, which makes cables for the telecoms

industry among others, said on Tuesday that it too had yet to see a pick-up in

flagging orders. "An action plan was already initiated as early as a year

ago and has yielded significant results in terms of headcount reduction,

inventory control, capex freeze and cost-cutting," Optronics CEO Jean-Christophe

Giroux said in a statement.

"We are now accelerating our efforts and strengthening our actions to

better adjust our cost structure to current conditions and expect all these cost

savings to be effective in the fourth quarter of this year," he said.

Tracking shares in Optronics, still fully owned by Alcatel, were down 3.06

per cent at 3.80 at 0838 -- mired far below their launch price of 85 euros in

October 2000. Alcatel shares were up 0.92 per cent at 12.11 euros, rebounding

from Tuesday's losses.

Slump claims more casualties



Alcatel Optronics, which pruned back its headcount by a couple of hundred
last year in France, Britain and the United States, said the new job-cutting

plan would affect France, Canada, the United States, the Netherlands and

Scotland.

"We are implementing (this plan) in order to further adjust to the

persistent market downturn," Giroux said. A company spokeswoman declined to

say how much Optronics hoped to achieve in cost savings after the cuts.

In late April, the company posted a first-quarter operating loss of 43

million euros as sales fell 78 per cent to 35 million. It forecast that

second-quarter sales would fall 30 per cent from the previous three months and

said for the full year it expected a 50-70 per cent decline in turnover.

Parent Alcatel, which plunged into the red last year with a 4.96 billion euro

net loss, said in April it saw the telecoms equipment market shrinking by 25 per

cent in the United States this year, by 15 per cent in Europe and by 10 per cent

in Asia.

Exactly a year ago, Optronics scaled back production at its plant in Lannion,

western France, to combat falling demand. While the company avoided firing any

of the site's permanent employees, scores of temporary staff were laid off.

(Additional reporting by Noah Barkin)

(C) Reuters Limited.