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Alcatel Losses Prompt More Cuts

Light Reading
News Analysis
Light Reading
10/31/2001

Alcatel SA (NYSE: ALA; Paris: CGEP:PA) continued to downsize today, as it announced larger than expected losses and 10,000 more layoffs (see Alcatel to Lay Off Another 10,000).

"We’re going to do our best to scale down Alcatel to a level where we can be profitable," said Serge Tchuruk, CEO of Alcatel, in this morning’s conference call.

The company had previously announced a 23,000-headcount reduction worldwide. The layoffs came in the wake of plummeting sales, which for the third quarter dropped €5.6 billion (US$5.04 billion), an 18 percent decline compared with the pro forma sales from the same period last year.

Despite the news -- or because of it -- shares of Alcatel's U.S.-based ADS, trading on the New York Stock Exchange, today rose 1.17 (8.50%) to 14.93.

Putting most of the blame on the downturn in the U.S. economy, the Paris-based company reported a net loss for the quarter of €558 million ($502 million), or a loss of €0.49 per share of class A stock (-$0.45 per share for the U.S. ADS shares). Analyst estimates called for a loss of only $0.13 per share, according to First Call. These losses included a €194 million ($174 million) charge for goodwill amortization. During its third quarter last year, Alcatel had a net income of €297 million ($267 million), or €0.25 per share ($0.23 per ADS shares).

Tchuruk said that, due to declining sales, Alcatel would be setting its breakeven point at a sales level of less than €5 billion ($4.5 billion) per quarter, meaning that costs would accordingly have to be cut by 20 percent. In addition, he said, the company expected to have €1.2 billion ($1.08 billion) in restructuring costs.

“The economy has been sluggish, as expected,” Tchuruk said. “We believe that we’re weathering out the problems better than many of our peers. Overall, Alcatel’s good geographic positioning and product mix have helped us resist relatively well the ongoing, less favorable market conditions.”

Alcatel reported that it expected to see an increase in sales for its fourth quarter, since this is generally the period when the company does best. However, Tchuruk said that he expected the difficult financial situation to continue into next year. “We are going to have a very prudent policy in estimating future sales."

— Eugénie Larson, special to Light Reading
http://www.lightreading.com

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Replicant7
Replicant7
12/4/2012 | 7:38:59 PM
re: Alcatel Losses Prompt More Cuts
So much for all of those promises from Alcatel earlier this year, assuring everyone that there would be no further job cuts at KYMATA. The 25% cut in workforce will supposedly only affect Operations ? Oh sure, right, and my name is George Bush. There is very strong evidence to suggest that the whole of R&D is also in the sights of the Reaper and it wont be too far down the line before the strike either. The final chapter in the KYMATA tragedy is soon to be on general release. R.I.P
RouteThis
RouteThis
12/4/2012 | 7:38:58 PM
re: Alcatel Losses Prompt More Cuts
How are former Newbridge Folks doing?

They made some good gear once, but I'm wondering who Alcatel has managed to keep around from that bunch.

Lucent purchased Ascend and aquired the Cascade team in the process - now there's apparently no one left who knows how to develop or troubleshoot that former Cascade kit (no new SW/HW for the CBX-500/GX550 in over a year - only bug fixes).

Is Alcatel making the same mistakes?

Cheers,

RT
Almost Alcacent
Almost Alcacent
12/4/2012 | 7:38:56 PM
re: Alcatel Losses Prompt More Cuts
The former Newbridge folk are doing just fine, at
least here in Canada. The original team that brought the ATM products to market is intact and moved have moved on to the 670 RSP.

Compared to most of our major competitors (and I have worked for one) this is a great place to be these days.

Almost Alcacent ("whew - dodged a bullet there!")
ben35bates
ben35bates
12/4/2012 | 7:38:54 PM
re: Alcatel Losses Prompt More Cuts
Make that most of the former Newbridge people. Alcatel cut about 450 jobs in Ottawa in July, leaving about 3000 in Ottawa. It has also chopped more than half the 450 optical component jobs at the former Innovative Fibre plant in Gatineau near Ottawa.
But overall, the ALA workforce in Canada has received only a light trim compared to what has happened at some ALA production and R&D operations in the U.S. and Europe.
The bizarre thing is that because ALA had so much trouble breaking into a hot US market two years ago, it is now feeling less pain than NT, LU etc from the stone-cold US market of today.
By the way, several private companies in the Terry Matthews empire (former Newbridge major player) have been laying off staff including Mitel and Newbridge Networks and Bridgewater Systems in Ottawa.
It will be interesting to see how the 670 sells in the current market environment.
Belzebutt
Belzebutt
12/4/2012 | 7:38:46 PM
re: Alcatel Losses Prompt More Cuts
What about the 7770? Is that also being developed in Ottawa? A lot of OPC folks moved there. What are the odds of the 7770 surviving the drought?
skeptic
skeptic
12/4/2012 | 7:38:44 PM
re: Alcatel Losses Prompt More Cuts
What about the 7770? Is that also being developed in Ottawa? A lot of OPC folks moved there. What are the odds of the 7770 surviving the drought?
----------------

I believe that the 7770 is a old alcatel switch
retrofitted to sort-of be a router. The switch
probably comes from europe. I believe all the
important decisions in the product may still
be made in europe. They may be using bodies
in north america to work on it though. I dont
really know.

Its likely to be low quality and unacceptable
to most customers outside of alcatel's captive
markets in europe which will see it as brillant
innovation.

I would guess that the project is way behind
schedule, but its unlikely to be terminated
in the near-term. At the very least it has
to be kept alive until they come up with a
better router story in some other way (probably
through buying something).
froggy
froggy
12/4/2012 | 7:38:33 PM
re: Alcatel Losses Prompt More Cuts
Skeptic,

YOU GOT SOME OF IT RIGHT AND SOME OF IT WRONG.

-------------------------
I believe that the 7770 is a old alcatel switch
retrofitted to sort-of be a router.
-----------------------------------
THE SWITCH MATRIX CONCEPT (MULTI-STAGE, NON-BLOCKING, SCALABLE TO MULTI-TERABITS) HAS BEEN INVENTED A FEW YEARS BACK, THE 7770 IS A NEW PRODUCT USING THIS SWITCHING TECHNOLOGY TO ROUTE IP/MPLS PACKETS

---------------------------
The switch
probably comes from europe.
----------------------------
BELGIUM

I believe all the
important decisions in the product may still
be made in europe.
------------------
AT ALCATEL, ALL !!! IMPORTANT DECISIONS ARE MADE IN FRANCE. THE US ORGANIZATION CONSISTS OF EX-DSC HALF DEAD DINOSAURS AND DOES NOT CARRY ANY WEIGHT.


They may be using bodies
in north america to work on it though. I dont
really know.
---------------
THEY HAVE A TEAM IN VIRGINIA OF IP/MPLS SW ENGINEERS, THESE GUYS ARE IN TROUBLE WITH THE NEW LAYOFF PLAN

Its likely to be low quality and unacceptable
to most customers outside of alcatel's captive
markets in europe which will see it as brillant
innovation.
-------------
PRODUCT IS ACTUALLY QUITE GOOD BUT LATE TO MARKET

I would guess that the project is way behind
schedule, but its unlikely to be terminated
in the near-term. At the very least it has
to be kept alive until they come up with a
better router story in some other way (probably
through buying something).
--------------------------
DO NOT BET ON ANY ACQUISITION BY ALCATEL IN IP, THEY HAVE BEEN BURNED BADLY BY PACKET ENGINES, ASSURED ACCESS AND XYLAN
RouteThis
RouteThis
12/4/2012 | 7:38:22 PM
re: Alcatel Losses Prompt More Cuts
Newbridge also once a good team working on the Mainstreet NMS (now the 5620 product for Alcatel) is this team just a remnant now - and is the NMS/OSS (including Telecordia OSS integration) even a priority for Alcatel...not just for the former Newbridge kit, but for all the gear/solutions that Alacatel sells to carriers?

Lucent lost so many former Cascade folks that they hardly have anyone left that can even fix bugs or troubleshoot the CBX500 and GX550 let alone do any new development on those platforms. I'm not aware of what's left of their Naviscore/NMS team.

I know that one of the RBOCs that I have dealt with has a great disdain for Naviscore and the former Cascade gear, since Lucent did practically nothing to give those solutions any longevity or support.
greybeard
greybeard
12/4/2012 | 7:36:58 PM
re: Alcatel Losses Prompt More Cuts
> Its likely to be low quality and unacceptable
> to most customers outside of alcatel's captive
> markets in europe which will see it as brillant
> innovation.

I would disagree with the end of this sentence
starting with the words "outside of". In fact
there are some **very** smart folks at some of
the European SPs, and they aren't going to be
fooled by a poor product.
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