Alcatel: back in black by year end?

14 Jan 2003

Serge Tchuruk, the chief executive of Paris-based equipment vendor Alcatel [NYSE: ALA], is widely-tipped to announce a raft of cost cuts that will help Europe’s largest telephone equipment manufacturer return to profitability during 2003 even if the present slump continues or worsens. Alcatel, like rivals Lucent Technologies and Nortel Networks, has already slashed its workforce in recent years in an effort to offset declining sales. By the end of the year it will have trimmed employee numbers to 60,000 from 99,000 at the end of 2001, although some analysts are predicting still more cuts. In December Tchuruk issued a gloomy assessment for 2003, forecasting a third year of declining sales, but at the same time raised Alcatel’s fourth-quarter sales forecast and hinted at a return to profitability – before interest and tax – earlier than originally expected; the company has posted losses for six consecutives quarters and reported a net deficit of EUR1.35 billion in Q3 2002. On the back of such high losses Alcatel is reorganising into three divisions – one for providing gear for fast internet access, one for wireless communications and one for corporate and satellite customers – to help boost sales, with some analysts suggesting Tchuruk may install unit managers for each with clearly defined financial targets.