Alcatel has reported a loss of E3.1 billion for Q2 and announced 14,000 job cuts.
French network equipment firm Alcatel on Thursday reported a Q2 loss of E3.1 billion, following an E3.2 billion charge to write off goodwill and excess inventory and to pay for its restructuring plan, which it believes will allow it to generate positive operating income for the year. The loss was E100 million higher than the company warned in May. CEO Serge Tchuruk said Alcatel plans to reduce its workforce by 14,000 permanent employees and 4000 temps this year. More than 7500 people have already left the company.
The news follows Alcatel’s statement last month that its restructuring plans involve outsourcing production rather than cutting French jobs, after trade unions criticized its cost reduction plans. But while the company will transfer an additional 2000 workers to contractors, it still needs to ax thousands more jobs by the end of the year. Indeed, the company axed 5000 jobs in the US just weeks after that announcement. Redundancies in France are inevitable.
However, even with the restructuring plan in place, questions remain about Alcatel’s future. The company also announced the resignation of its COO Krish Prabhu, who has been in charge of its North American strategy. While Mr Prabhu says he wants to spend more time with his family, it’s hard not to make a connection with the failed attempt to merge with Lucent, which marked the end of the US acquisition spree he masterminded.
The future for Alcatel is murky. The US acquisitions have left it with a strong product portfolio (more focused than if the Lucent buy had succeeded), and the restructuring will undoubtedly cut costs. In the longer term, Alcatel isn’t going to go bust and there are few potential predators lurking.
But nobody in the industry knows whether, as Mr Prabhu believes, the telecoms sector has bottomed out or whether there are worse times to come. Mr Tchuruk says, I don’t see any turnaround in the industry taking place this year. The restructuring is extremely unlikely to be enough to keep Alcatel in operating profit for 2001.
