Alcatel Losses Prompt More Cuts
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