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Alcatel Prunes Jobs

Alcatel SA (NYSE: ALA; Paris: CGEP:PA) continued its restructuring today by announcing it will cut about 400 jobs in North America. The news follows yesterday's loss of 470 jobs in France and the redeployment of a further 900 staff on the vendor's home turf (see Alcatel Cuts Workforce).

The North American jobs will be shed from the carrier-focused part of the business, with the rump of the jobs being lost at the Plano, Texas, and the Ottawa facilities, the company's major locations in North America. The losses will be evenly split between the U.S. and Canada. Following the cuts, Alcatel will have about 9,300 staff in North America.

The headcount reductions are part of an ongoing restructuring process that the vendor deems necessary if it is to reach its goal of being profitable across the board in 2004 (see Alcatel Says Recovery on Track ). To reach that target, Alcatel looks to be squeezing as much of its remaining restructuring costs into the last month of 2003 so they don't impinge on 2004's figures, believe analysts at Lehman Brothers. They say the company needs to cut more costs now as it is looking to reduce the sales level at which it can break even, a figure previously set at €3 billion per quarter.

The Lehman team estimates the cost of making staff redundant in France is about €100,000 per head, so yesterday's cuts on its home turf will lead to a restructuring charge of about €50 million in the fourth quarter. There will also be an as yet unspecified one-off retraining charge related to the 900 staff, mostly engineers, that are moving from the fixed-line business to the wireless division.

Alcatel recently announced separate job losses from its handset manufacturing business in France, where up to 440 staff are affected, and from its German operations, where 890 staff are being lost. Even without the cost of axing the North American staff, the Lehman team believes the recent redundancies will result in a fourth-quarter charge of up to €150 million.

— Ray Le Maistre, International Editor, Boardwatch

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