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Alcatel Issues Warning, Cuts Jobs

June 26, 2002

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PARIS (AP) _ French telecommunications equipment maker Alcatel on Wednesday warned it will have an operating loss in 2002 and said it will shed a further 10,000 jobs as part of an expanded restructuring plan.

The announcement dealt a blow to the credibility of Alcatel’s management, which earlier said the company would be able to ride out current market weakness.

Alcatel’s downgrade, combined with an alleged accounting scandal surrounding U.S. long-distance carrier Worldcom, weighed on the Paris stock exchange Wednesday.

Chief financial officer Jean-Pascal Beaufret, speaking on a conference call, said the company will reduce its work force by another 10,000 jobs to 70,000 by the end of 2003. It employed 110,000 at the end of 2000, and had already announced 30,000 job cuts this year and last.

Beaufret said the new job cuts will come through a combination of layoffs, outsourcing and asset disposals.

Competitors such as Nortel Networks Corp., Nokia, Ericsson and Lucent Technologies Inc. had long ago warned that weak market conditions would affect results.

Alcatel had maintained it would be able to outperform its rivals, but in a statement Wednesday the company blamed further deterioration in market conditions in recent weeks for its expected shortfall.

As recently as April, Alcatel was confidently forecasting a return to operating profit this year following the operating loss of 361 million euros ($358 million) in 2001.

Analysts said the warning would strike a blow to the credibility of Alcatel management while investors bailed out of the company’s stock. Alcatel’s stock price closed with a loss of 16.5 percent in Wednesday’s trading.

Alcatel also said it did not expect any revenue growth in the second quarter.

It also said it would double its previous restructuring plan to 1.2 billion euros ($1.19 billion) from 600 million euros ($594 million) to lower costs.

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