Alcatel hopeful despite losses

May 5, 2009

, PARIS, May 5 – Telecom equipment group Alcatel-Lucent reported a quarterly loss of 402 million euros (535 million dollars) on Tuesday, the ninth quarterly loss running, but stood by its forecast for the year.

The group, which is restructuring after heavy losses, said that 2009 would be a year of "transition" and finance director Paul Tufano said the company intended to return to net profit "in the second half of 2010 and for the whole of 2011."

The price of shares in the group, formed of a tie-up between US group Lucent and French Alcatel, was showing a fall of 1.89 percent. The overall CAC 40 index of leading shares here was down 0.31 percent.

Alcatel-Lucent is being restructured under new management after losses and a boardroom shakeup.

The quarterly loss of 402 million euros compared with a loss in the same period of last year of 181 million euros.

It also reported an operating loss, excluding writedowns of good will arising from the takeover of Lucent by Alcatel, of 254 million euros compared to a profit of 36 million euros 12 months earlier.

Sales fell by 6.9 percent to 3.6 billion euros, owing mainly to a slump on the North American market.

The sales figure was broadly in line with analysts\’ expectations but the adjusted operating loss was greater than an estimate of about 138 million euros.

Brokers Aurel BGC commented: "Alcatel-Lucent has reported an operating loss twice as big as the consensus expectation and restructuring costs counted for a further 178 million euros in consuming the company\’s cash."

Consequently, they said, "the financial profile of Alcatel\’s credit is deteriorating further."

Chief executive Ben Verwaayen said that although the operating loss in the first quarter had been expected owing to the seasonal nature of the business and market conditions, "we are not satisfied" with the outcome.

However, the group stood by its forecast for the year "and we are taking every step to achieve it," he said.

The group is aiming for an adjusted operating figure of about zero loss and expects its market to contract by eight to 12 percent on a basis of constant exchange rates.

Verwaayen said during a telephone conference that the quarter had been marked by a reshaping of the group, and "we have made progress in this field," while also welcoming contracts signed recently in China covering third-generation mobile telephone equipment.

He said that "2009 will be a year of transition" for the group, which was aiming to rationalise its range of products and reduce costs.

The group has already cut 290 management jobs of 1,000 announced in December and has reduced the number of sub-contractors by 770 out of a total of 5,000 planned cuts.

So far this year, shares in the group have risen by about 23 percent. The CAC 40 index has gained 0.28 percent.

However, on March 3, Alcatel-Lucent shares became the first in the history of the CAC 40 index to fall below one euro and over 12 months the shares have fallen by 57 percent. In May 2008, they were worth about 5.0 euros.

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