Alcatel sinks into the red, slashes 10,000 jobs

Catherine Bremer

PARIS: French telecoms equipment giant Alcatel said on Tuesday it had plunged

into the red in the third quarter and warned of full-year losses as it announced

another 10,000 job cuts in Europe to counter a crippling slump in the industry.

Shares in the company bounced back sharply from early losses however, as

investors welcomed aggressive cost-cutting efforts, which they said would

position the firm for an eventual upturn in the sector.

For now, that upturn appears distant. Alcatel said it was braced for

continued weakness in its markets and would have to cut costs by an additional

20 percent to bring down its breakeven point. It plans to book a further 1.2

billion euros in provisions this year linked to the ongoing restructuring.

As telecoms operators rein in investments in wireless telephony and Internet

networks, the companies that supply the components for these networks are

navigating through one of the industry's worst periods ever.

Alcatel, which ramped up staff during the dizzying heights of the telecoms

boom, is now scrambling to pare down operations. The 10,000 job cuts unveiled on

Wednesday come on top of 23,000 already announced by the company.

"The figures were not great but there are some reasons to hope for a

recovery next year," said Jacques-Antoine Bretteil, a fund manager at

International Capital Gestion in Paris. "The aggressive cost cuts will

bring down the breakeven threshold."

At 0855 GMT, Alcatel shares were up 5.8 per cent at 16.61 euros, bouncing

back from losses of around four percent in early trade. The stock has gained

over 20 per cent this month amid a pick-up in telecoms sentiment.

The stock has shed 47 per cent in the past 12 months, outperforming a 63 per

cent slide in the Dow Jones Stoxx technology index of which it is a member.

Net and operating loss



Alcatel posted a three month net loss of 558 million euros ($506.8 million),
versus a 297 million euro profit a year ago, and an operating loss of 215

million, versus profit of 619 million. The 2000 comparative was 579 million on a

proforma basis to exclude Alcatel's Nexans cables unit, floated in June.

The figures were below analyst forecasts for an operating loss of 185 million

euros and a net loss of 309 million. Sales fell 18 percent on a proforma basis

to 5.62 billion euros, a drop Alcatel attributed to the "severe" US

downturn.

Chairman Serge Tchuruk told a news conference the fall in revenues this year

compared favourably to many of Alcatel's rivals, with the exception of Finnish

handset champion Nokia, meaning the French group was gaining market share.

For the fourth quarter, Alcatel said it expected an operating loss of around

the same size as the third quarter and a full-year net loss of around five

billion euros.

Tchuruk said he expected a 2001 operating loss in the region of 100-200

million euros, but noted that lower working capital requirements would help the

company reduce its debt to around four billion euros from 4.33 billion at

end-2000.

"It's very difficult to make forecasts for 2002. We will be in the red,

but not far from breakeven," Tchuruk said. Finance Director Jean-Pierre

Halbron said he expected ADSL high-speed Internet networks to be one of the

first markets to recover as it offered an instant return on investment for

operators.

(C) Reuters Limited.