Alcatel to slash 10,000 more jobs
Too early to know how Kanata will be affected
Bert Hill
The Ottawa Citizen
Saturday, September 21, 2002
http://www.canada.com/ottawa/ottawacitizen/story.asp?id=E4213F08-DFA0-45CC-95BE-E3E31A74C064
Alcatel said yesterday it will cut 10,000 more jobs because sales will fall 15 per cent this quarter as carriers in critical European and Asian markets slash spending.
The Paris-based telecommunication giant plans to reduce its workforce to 60,000 by the end of 2003, down from its previous target of 70,000, in order to cut quarterly operating costs. It had a workforce of 130,000 in late 2000 and has about 85,000 today.
The sales warning is an embarrassment for Serge Tchuruk, Alcatel's chief executive, who in July said that his company would experience little change in sales from the June to September quarters. It is the second time this year he has had to eat his words.
Alcatel said it is too early to say what action will take place in Kanata, where 600 jobs have disappeared in two years, leaving a workforce of 2,800. Alcatel also recently shut a 450-person optical component operation in Gatineau.
The Kanata networking operation will likely experience more pain in coming months. Sales of promising switching equipment developed in Kanata have been hurt as Alcatel got squeezed by weak general demand and some losses of market share to Nortel Networks and Cisco Systems, according to some new market research studies.
BNP Paribas analyst Phillipe Schmitt said in a report that Alcatel is "losing the safety net" that has protected it from the deeply depressed North American market.
Europe, which generates half of Alcatel sales, is the big problem. German and French phone companies are slashing networking equipment spending. Mr. Schmitt said Alcatel's weak wireless products are also vulnerable to slowing demand in Europe.
He said Alcatel is also losing Asia as a cushion -- it generates 17 per cent of sales, slightly more than the U.S. --because of a slowdown in the strong China market.
The latest job cuts will cost Alcatel $490 million U.S. in severance, retirement and restructuring costs. It said it has $8 billion in cash, securities and credit to manage the deeper rounds of cuts without selling more assets.
Mr. Schmitt said "We still expect the company to be able to weather the storm as long as we see a market recovery at some point in 2004."
But many investors, analysts and employees are concerned about losses of $7 billion U.S. over the last five quarters.
Alcatel tried to merge with Lucent Technologies last spring in a deal that fell apart over control issues. Then, it appeared to have the sales, profits and high stock price to lead an industry consolidation compared with a much weaker Nortel and Lucent.
But with sales in sharp decline, losses rising and share prices plunging, Alcatel will have its hands full managing its own problems.
Alcatel Canada stock closed unchanged at $4 yesterday after falling 31 per cent in the last week and 85 per cent since January.
Alcatel, Nortel, Lucent, Tellabs and other industry players are now expecting sales to fall 10 per cent to 25 per cent this quarter.
Yesterday, Ciena Corp., a fibre-optic system maker that took market share from Nortel and Alcatel last year before getting hit hard early this year, said it will cut 450 more jobs or 17 per cent of its remaining workforce.
Avici Systems, a rapidly weakening competitor to Cisco Systems in network routers, said it will cut 75 employees or 24 per cent of its workforce. It is planning a 1-for-5 stock consolidation in a bid to avoid being delisted by Nasdaq.
Early this year, Mr. Tchuruk was crowing about a strong surge in business that appeared to separate Alcatel from Nortel, Lucent and others caught in a seemingly irreversible fall in business.
"T2001 was the year we cleaned up our balance sheet and cut our debt in half. That puts us in a position to take advantage of rebound in the market when it occurs."
But in hindsight, Mr. Tchuruk's comment of just a few months earlier were more prescient.
He said predictions were tough because Alcatel depends on the health of its customers. "We're clearly in a risky period."
Indeed, some elements of Mr. Tchuruk's five-year program to transform Alcatel from a sprawling conglomerate into a tough new telecommunication contender now are in question.
Siemens, the big German competitor, hung on to most of its range of industrial divisions and it is helping Alcatel weather the storm.
It now appears possible that Siemens will emerge as the European player most likely to lead consolidation.
In North America only Cisco Systems appears to have the resources to play the role.
Too early to know how Kanata will be affected
Bert Hill
The Ottawa Citizen
Saturday, September 21, 2002
http://www.canada.com/ottawa/ottawacitizen/story.asp?id=E4213F08-DFA0-45CC-95BE-E3E31A74C064
Alcatel said yesterday it will cut 10,000 more jobs because sales will fall 15 per cent this quarter as carriers in critical European and Asian markets slash spending.
The Paris-based telecommunication giant plans to reduce its workforce to 60,000 by the end of 2003, down from its previous target of 70,000, in order to cut quarterly operating costs. It had a workforce of 130,000 in late 2000 and has about 85,000 today.
The sales warning is an embarrassment for Serge Tchuruk, Alcatel's chief executive, who in July said that his company would experience little change in sales from the June to September quarters. It is the second time this year he has had to eat his words.
Alcatel said it is too early to say what action will take place in Kanata, where 600 jobs have disappeared in two years, leaving a workforce of 2,800. Alcatel also recently shut a 450-person optical component operation in Gatineau.
The Kanata networking operation will likely experience more pain in coming months. Sales of promising switching equipment developed in Kanata have been hurt as Alcatel got squeezed by weak general demand and some losses of market share to Nortel Networks and Cisco Systems, according to some new market research studies.
BNP Paribas analyst Phillipe Schmitt said in a report that Alcatel is "losing the safety net" that has protected it from the deeply depressed North American market.
Europe, which generates half of Alcatel sales, is the big problem. German and French phone companies are slashing networking equipment spending. Mr. Schmitt said Alcatel's weak wireless products are also vulnerable to slowing demand in Europe.
He said Alcatel is also losing Asia as a cushion -- it generates 17 per cent of sales, slightly more than the U.S. --because of a slowdown in the strong China market.
The latest job cuts will cost Alcatel $490 million U.S. in severance, retirement and restructuring costs. It said it has $8 billion in cash, securities and credit to manage the deeper rounds of cuts without selling more assets.
Mr. Schmitt said "We still expect the company to be able to weather the storm as long as we see a market recovery at some point in 2004."
But many investors, analysts and employees are concerned about losses of $7 billion U.S. over the last five quarters.
Alcatel tried to merge with Lucent Technologies last spring in a deal that fell apart over control issues. Then, it appeared to have the sales, profits and high stock price to lead an industry consolidation compared with a much weaker Nortel and Lucent.
But with sales in sharp decline, losses rising and share prices plunging, Alcatel will have its hands full managing its own problems.
Alcatel Canada stock closed unchanged at $4 yesterday after falling 31 per cent in the last week and 85 per cent since January.
Alcatel, Nortel, Lucent, Tellabs and other industry players are now expecting sales to fall 10 per cent to 25 per cent this quarter.
Yesterday, Ciena Corp., a fibre-optic system maker that took market share from Nortel and Alcatel last year before getting hit hard early this year, said it will cut 450 more jobs or 17 per cent of its remaining workforce.
Avici Systems, a rapidly weakening competitor to Cisco Systems in network routers, said it will cut 75 employees or 24 per cent of its workforce. It is planning a 1-for-5 stock consolidation in a bid to avoid being delisted by Nasdaq.
Early this year, Mr. Tchuruk was crowing about a strong surge in business that appeared to separate Alcatel from Nortel, Lucent and others caught in a seemingly irreversible fall in business.
"T2001 was the year we cleaned up our balance sheet and cut our debt in half. That puts us in a position to take advantage of rebound in the market when it occurs."
But in hindsight, Mr. Tchuruk's comment of just a few months earlier were more prescient.
He said predictions were tough because Alcatel depends on the health of its customers. "We're clearly in a risky period."
Indeed, some elements of Mr. Tchuruk's five-year program to transform Alcatel from a sprawling conglomerate into a tough new telecommunication contender now are in question.
Siemens, the big German competitor, hung on to most of its range of industrial divisions and it is helping Alcatel weather the storm.
It now appears possible that Siemens will emerge as the European player most likely to lead consolidation.
In North America only Cisco Systems appears to have the resources to play the role.
