Optical/IP Networks

Alcatel Close to Fiber Optics Deal

Alcatel SA (NYSE: ALA; Paris: CGEP:PA) looks set to offload its optical fiber and cable business as it continues to look for ways to cut costs.

During a press briefing about the vendor's latest financial results, CEO Serge Tchuruk said the company is in ongoing talks regarding a "partnership" for the loss-making business, and that an agreement could be reached soon.

Earlier in the week, optical cable company Nexans said it had made a bid for the Alcatel business. Nexans, which was spun off from Alcatel in 2001 and in which Alcatel still holds a 15 percent stake, was reportedly close to buying the business for about €200 million last October.

Nexans recorded improved financials earlier this week, posting a tiny net profit of €1 million ($1.26 million) for 2003 compared with a loss of €40 million ($50 million) a year earlier.

While Alcatel couldn't rid itself of a red bottom line, the French vendor continued its recovery in the final quarter of 2003 with increasing sequential revenues and narrower losses (see Alcatel Reports Q4 Loss).

And CEO Serge Tchuruk expects the company to experience accelerating growth during 2004 after the seasonally low first quarter, which is set to be flat year on year. He told the press conference that for the first time in three years Alcatel was able to talk about growth instead of market contraction.

All the same, Alcatel is planning a contraction of its laborforce in 2004. It plans to reduce staff to 54,000 from today's headcount of 60,000. The costs associated with this are included in the company's Q4 results, Alcatel says.

Fourth quarter revenues were €3.77 billion ($4.74 billion), up from the third quarter's €3.04 billion ($3.82 billion), but down compared with €4.51 billion ($5.67 billion) a year earlier.

Net loss in the fourth quarter was €524 million ($659 million)compared with €1.12 billion ($1.41 billion) a year earlier. Tchuruk attributed the loss to the company's ongoing cost-cutting program. The latest fourth quarter figure included €524 million ($659 million) of restructuring charges and €210 million ($264 million) of goodwill charges.

The reduction in net losses was attributed largely to the company's cost-cutting efforts, which will continue in the current quarter. However, the cost of that ongoing restructuring has already been booked in the fourth quarter charge.

After an early dip on the Paris exchange, the vendor's share price recovered by mid-morning -- it was up by 5 cents to €12.57 from yesterday's close of €12.52.

Analysts, however, were lukewarm on the figures. The telecom equipment team at Lehman Brothers regard the flat outlook for the first quarter as "disappointing," though the analysts believe increasing sales during the rest of the year should be achievable as carrier capex spend increases, especially in Europe.

Richard Windsor at Nomura International was a little more upbeat, noting that a potential break even in the first quarter would show how well the company has done with its cost-cutting efforts. The company's results came in above Nomura's expectations.

For the full year, Alcatel recorded revenues of €12.51 billion ($15.73 billion), compared with €16.55 billion ($20.82 billion) in 2002. The year's net loss was €1.94 billion ($2.44 billion), down significantly from 2002's €4.75 billion ($5.97 billion).

During 2003 the vendor noted increasing sales for its DSL equipment. It shipped 15.1 million lines in 2003, double the number in 2002, with 5.1 million lines shipped in the fourth quarter alone.

The vendor also noted growth in VOIP and other IP service systems, and claimed "traction in upgrades of ATM networks to IP/MPLS and data-aware metropolitan optical networks."

— Ray Le Maistre, International Editor, Boardwatch

COMMENTS Add Comment
whyiswhy 12/5/2012 | 2:30:25 AM
re: Alcatel Close to Fiber Optics Deal mostly. Only it wasn't Alcatel buying JDSU, it was JDSU "donating" their telecom part, and Nexans using the cash from that deal to buy the Alcatel portion.

Now I see clearly said the blind man.


bonnyman 12/5/2012 | 2:30:21 AM
re: Alcatel Close to Fiber Optics Deal whyiswhy wrote:
"So....the deal with JDSU was true..."

"mostly. Only it wasn't Alcatel buying JDSU, it was JDSU "donating" their telecom part, and Nexans using the cash from that deal to buy the Alcatel portion."

why, I'm interested in what you're saying. What's the connection between JDSU and Nexans?

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