Alcatel-Lucent to cut 5,000 jobs after loss in Q2

By SARAH DiLORENZO | July 26, 2012 | 11:36 AM EDT

PARIS (AP) — Telecoms equipment maker Alcatel-Lucent plans to eliminate 5,000 jobs in a multimillion-euro drive to cut costs announced Thursday after it reported a second-quarter net loss of €254 million ($308 million).

The Franco-American company unveiled a restructuring plan that it said would take €1.25 billion off its bottom line by next year.

Shares in the company plunged as the Paris bourse opened; by late afternoon, they were down 6.9 percent. Alcatel-Lucent had reported a second-quarter net profit of €43 million last year.

The company said the global economic slowdown and heightened competition were hitting profits and that it would exit or reduce operations in markets where it was struggling. It did not specifically name those markets, but it logged the largest decline in revenues in Europe, where sales fell 15.6 percent over the second quarter the last year. The company said that retreat was driven by Western Europe.

Its wireless, optics network applications businesses all also registered steep declines in revenues. By contrast, its IP telephony division that supports movie streaming, video calls and gaming was booming, with revenues growing 16.5 percent over last year.

Alcatel warned last week that it would miss its target of improving on the 3.9 percent adjusted operating margin achieved in 2011. It did not update this guidance.

The Paris-based firm reported revenue of €3.5 billion for April to June, down 7.1 percent from the same period last year.

While the company has already promised a slew cost cuts, it announced another €750 million in reductions that will bring its total cuts to €1.25 billion by the end of 2013. It will achieve those by eliminating 5,000 jobs, ending unprofitable contracts and leaving or reorganizing operations in poor markets. It did not say where the jobs cuts would come.

"It is clear from the deteriorating macro environment and the competitive pricing environment in certain regions challenging profitability that we must embark on a more aggressive transformation," said CEO Ben Verwaayen. "We are taking aggressive action that will improve our agility in the marketplace while remaining fully committed to both our customers and continuing to deliver world-class innovation."

Several French companies have announced job cuts recently — an onslaught that has troubled the new Socialist government, which campaigned on a promise to return France to growth. A plan by carmaker PSA Peugeot Citroen to cut 8,000 jobs has drawn stiff criticism from President Francois Hollande and his Cabinet.

But on Thursday, the Ministry for Industrial Recovery — which is charged with bringing manufacturing jobs to France and keeping them here — said it would wait to comment until it knew more about the plan.

Alcatel-Lucent supplies telecommunication carriers such as AT&T, Verizon and France Telecom. It competes with European rivals such as LM Ericsson AB of Sweden and Nokia Siemens Networks of Finland.

But it has struggled to turn a profit since the 2006 merger of France's Alcatel and Lucent of the United States. Rounds of cost-cutting helped it make 2011 its first full-year profit since the tie-up.