Alcatel-Lucent Expands Job Cuts to 12,500

Freshly merged Alcatel-Lucent (ALU) is stepping up job cuts to 12,500 after lurching into a fourth-quarter loss and forecast a first-quarter sales dip as tough trading and uncertainties from the tie-up take their toll.

However, the French-American telecoms equipment provider said it expected full-year revenues to grow by at least 5 percent, in line with the global telecoms operators' market.

It also reassured investors by keeping the annual dividend unchanged as some feared restructuring would put pressure on cash. The pay-out, the in-line results and the bigger than expected cost-cuts lifted the shares more than 3 percent.

The stock was up 2.76 percent at 10.43 euros by 0926 GMT outperforming the technology index up 1.14 percent.

"The market might be impressed by more aggressive restructuring measures announced and higher than expected synergies," WestLB said in a morning note.

Alcatel-Lucent, which issued a profit warning in January, incurred a net loss of 618 million euros ($802.3 million) in the three months to December 31 compared with a profit of 381 million euros a year earlier. The deficit included restructuring and impairment charges of 577 million euros.


Workers at Alcatel-Lucent have called for a strike on February 15 to protest against the job cuts which were previously expected to amount to 9,000. It declined to give details on the speed of the restructuring or regional breakdown.

"The cuts will be discussed at each level in each country with organizations representing employees at Alcatel-Lucent," Finance Director Jean-Pascal Beaufret said in a conference call with journalists.

Alcatel-Lucent said it now expected pre-tax savings of 1.7 billion euros over three years, up from 1.4 billion euros previously.

The job cuts come after Canada's Nortel Networks, from which Alcatel has just acquired its UMTS mobile access unit, said on Wednesday it would slash 2,900 jobs, or 8.5 percent of its workforce over the next two years.

In spite of the thorough revamp of its operations, Alcatel-Lucent said it planned to propose a dividend of 0.16 euro a share for 2006, the same it paid for 2005 and for 2001.

It paid no dividend in 2002-2004

"The payment of a dividend was not necessarily guaranteed so it is rather good news," said Vincent Maulay, analyst at Oddo Securities.


The results are the first combined for the two groups since they started operating as a merged entity on December 1.

"These figures are disappointing indeed... but the fourth quarter does not reflect the benefits of the tie-up between Alcatel and Lucent and the growth potential of our company today," Beaufret said.

"We have suffered from tough trading conditions, namely in North America as many of our clients there are consolidating..., so when they merge they delay certain investments."

Beaufret added that the company had also suffered from uncertainty created by the tie-up as clients did not know on which products they could rely in the future and the companies' teams had been much focused on the reorganization.

He declined to say by how much revenues would decline in the first quarter.

"Guidance is disappointing. A year-on-year decline is worse than almost all competitors and it is clear that Alcatel-Lucent is going to underperform the market and its peers for the next quarter at least," Richard Windsor, analyst at Nomura said in a note, retaining a neutral rating on the stock.

Windsor said there was a risk revenue expectations could be missed again.

In the fourth quarter, Alcatel-Lucent made an operating profit of 21 million euros on 16 percent lower fourth-quarter revenues of 4.421 billion euros.

The group said its mobile business had suffered most last year as many operators had kept a lid on investments.

But the fixed-line operations remained strong. It sold a record 8.8 million DSL lines in the fourth quarter and some 30.6 million overall last year.