Results dip at Alcatel-Lucent prompts lay-offs

Alcatel-Lucent has said it plans further lay-offs after its post-merger financial performance continued to disappoint.


Networks specialist Alcatel-Lucent has said it plans further lay-offs after its post-merger financial performance continued to disappoint.

The company fleshed out its three-point plan for restoring profitability, including a renewed focus on products to help carriers transform their networks to an all-Internet Protocol (IP) infrastructure, a move from products to value-added services, and a more streamlined organisation with fewer staff in support functions to eliminate post-merger duplication. It will cut a further 4,000 jobs by 2009, in addition to the thousands it has already shed, and hopes the moves will save it a further €400m (£280m) by that date, it said.

Alcatel-Lucent's board has expressed its disappointment with the decline in performance since the 1 December merger of Alcatel and Lucent Technologies, but expressed its continued support for CEO Patricia Russo earlier this month. Russo has the board's support for her plan to restore the company to profitability, she said in a statement.

For the quarter ended 30 September, the company reported revenue of €4.35bn (£3bn), a fall of 11.4% compared to the €4.91bn (£3.42bn) that the two companies made a year earlier. Alcatel-Lucent provided comparable figures for the companies' performance before their merger.

Currency fluctuations hurt the company's performance: the decline in revenue would have been 7.8% at constant exchange rates.

Alcatel Lucent remains in the red, with a loss of €345m (£240m) this quarter, compared to a comparable net profit of €532m (£370m) for the companies a year earlier.

Alcatel-Lucent is still hoping for a "solid ramp up in revenue" in the fourth quarter, but seems less optimistic: it now says revenue for the full year will remain flat, rather than "flat or slightly up" as it predicted last month. The company offered no guidance on earnings for the full year.

Revenue from the company's largest business segment, carrier networks, dropped 15.2% year on year, while operating profit for the segment fell from €389m (£271m) to €22m (£15m). Alcatel-Lucent said the decline was exaggerated by the comparison with unusually strong sales of code division multiple access (CDMA) wireless networks in North America in the third quarter last year, as operators rushed to deploy a performance-enhancing software upgrade.

Services revenue remained flat at €777m (£541m). The company sees services around the delivery of Internet Protocol television (IPTV) programming as a strong area.

One bright spot was the company's enterprise networks business, where revenue rose to €380m (£265m) from €362m (£252m) a year earlier. The move by businesses from traditional switched telephone systems to voice over IP (VOIP) on internal networks was a key driver, the company said.

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