Alcatel acquisition marks new confidence in equipment market

19 May 2003

French equipment supplier Alcatel announced on Friday that it is planning its first purchase since its costly acquisition spree during the telecoms boom of the late-1990s. After suffering three years of financial turmoil, the company hopes to pay USD150 million in shares for US-based IP switching and multiprotocol label switching specialist, Timetra, which Alcatel will integrate into its US operations; the deal is expected to be completed in the third quarter of 2003.

During 2002 Alcatel wiped out its debt pile thanks to a series of cost cutting schemes and workforce reductions, and last week disposed of its biggest loss-making unit Alcatel Optronics, which it sold to Avanex of the US. Shares in the equipment vendor rose 1.8% to EUR7.49 on Friday, from a low of EUR2.05 in September last year. Alcatel, whose upturn in fortunes follows a similar return to profit for fellow equipment manufacturer Lucent Technologies, said that it hopes to reach breakeven in 2003; as a result of the cost-cutting efforts, the quarterly sales level needed to achieve this fell from over EUR6 billion in the 2001 to EUR4.1 billion in 2002 and is expected to drop further to around EUR3 billion by the end of 2003.