Alcatel has said it expects the market for telecoms equipment to fall further this year.
French telecoms equipment group Alcatel has said that continuing reduction in carriers’ budgets are likely to combine with unfavorable exchange rates between the euro and the dollar to produce another decline in the telecoms equipment market this year. It expects the market to decline by a further 15% in 2003.
The company saw its sales fall by a third last year, and says that Q1 sales are likely to be down 25-30%. On a more positive note, it believes that cost cutting efforts will allow it to reduce its operating losses. It reported a loss of E836 million for Q1 last year.
For the full year ended December 31, Alcatel made a loss of E4.7 billion – improving on the E4.96 billion loss made a year earlier. Revenues were down nearly 35% to E16.5 billion.
The grim forecast from Alcatel for the year ahead follows a similarly bleak picture painted by Ericsson on Monday. Ericsson said that the mobile systems market, which dropped by 20% in 2002, will fall by another 10% in 2003.
Like its rivals, Alcatel has been forced to highlight its cost reductions as a key indicator of progress. It has managed to bring down its quarterly breakeven point by E2 billion, to E4.1 billion, and now hopes to reduce it further, down to E3 billion.
A particularly poor performer is its Alcatel Optronics division. Net losses at the division were E414.8 million, compared to E144.5 million in the year ago period. Sales plummeted from E470.4 million to E84.1 million. Alcatel now plans to sell the business, but it is unlikely to receive a decent price for it in current market conditions.
Alcatel has been suffering from its dependence on European markets, which contribute 43% of its revenues. The US accounts for just 15%. While its merger negotiations with Lucent fell apart last year, the continued decline of the telecoms market means that the logic of a similar move remains.
