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Alcatel-Lucent plans further job cuts

Alcatel-Lucent plans further job cuts
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First Published: Sun, Feb 11 2007. 11 08 PM IST
By Agencies
PARIS: Uncertainty among the world's phone companies left Alcatel-Lucent with a bruising net loss on Friday in its first quarterly report as the world's largest telecommunications maker, and the company moved to eliminate thousands of additional jobs.
For critics, the cascade of negative announcements offered some validation of their skepticism over the $11.6 billion merger of Alcatel with Lucent Technologies, which was first proposed in March and officially completed on Dec. 1.
The company cited "challenging market conditions," hesitation from its customers and challenges from regulators as it increased the number of jobs it would eliminate as part of the merger by 3,500, to 12,500.
But the chief executive, Patricia F. Russo, tried to cast the rest of the year in a positive light, saying some of the factors that led to the loss of 618 million euros ($804 million) in the fourth quarter, in contrast to a profit of 381 million euros ($496 million) a year ago, would not recur. She cited customer uneasiness as the merger closed, and the consolidation of some big customers, including AT&T, BellSouth and SBC.
Alcatel-Lucent, posting results for the first time as a combined company, said revenue, which declined 16 percent in the latest quarter to 4.4 billion euros ($5.74 billion) from 5.25 billion euros a year ago, would show only minimal gains before April.
For 2007, the company said revenue would be steady with an estimated 5 percent growth in the phone carrier business. It did not give a profit forecast for the year.
Last year's revenue came in at 18.25 billion euros ($23.75 billion), which is 1.7 percent lower than 2005. All the figures were on a pro forma basis, as if the two companies had been combined for the entire period.
The increase in job cuts, Russo said in an interview, came from finding new ways to combine tasks, as well as a response to "what we see happening in the marketplace."
For a second time, she also raised the estimate of how much money the merger would save in the longer term, to 1.7 billion euros over three years. The company will also keep its dividend of 16 cents a share
Investors seemed not to be overly disappointed, sending shares down just one cent in Paris, to 10.14 euros. The company had warned on Jan. 23 that the quarter's profit would be wiped out, and shares fell 8.5 percent that day. The price is down 7 percent so far this year.
The fourth quarter "was really an extraordinary, exceptional quarter," Jean-Pascal Beaufret, the chief financial officer, told analysts on a conference call. It was, Ms. Russo added, "not indicative of the long-term growth benefits of the merger."
Still, the company's French unions called a one-day strike for Thursday to protest the increase in layoffs. Of Alcatel-Lucent's 80,000 employees at the end of 2006, about 12,000 were in France. Although fewer than 10 percent are unionized, labor leaders said they expected a large number of nonunion workers to join the protest.
Two other major hardware makers, Ericsson of Sweden and Nortel Networks of Canada, also recently warned of soft business. Ericsson, which last year bought the British company Marconi, cut its forecast for the mobile-equipment market to midsingle-digit growth. Nortel said this week that it would shed 2,900 jobs over the next two years.
In addition, Nokia of Finland and Siemens of Germany are merging their network divisions.
In Europe, Russo said, telecommunications investment was responding to a "less favorable" regulatory climate. The European Commission is pressuring companies like Deutsche Telekom to give rivals access to their next-generation networks. The phone companies, which are investing billions of dollars in fiber optic and other advanced transmission networks, are resisting.
European Union law requires countries to force telecommunications companies with a dominant market position to open networks on favorable terms to rivals. In Germany, Deutsche Telekom controls more than 90 percent of broadband Internet connections.
"The bottleneck of regulation is short-term because people need the bandwidth -- the market demand is there," Mr. Beaufret said in an interview.
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First Published: Sun, Feb 11 2007. 11 08 PM IST
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