Alcatel-Lucent, the French-American telecommunications equipment maker, reported a third-quarter loss of $373 million today. To help the bottom line, the company plans to layoff another 4,000 employees beyond the February announcement of 12,500 layoffs. This amounts to a 20% reduction in payroll. It is hoped this move will save the company an additional $578 million by 2009.
CEO Patricia Russo, the architect of the company’s $2.45 billion cost-cutting plans, denies reports that the board of directors is unhappy with her future plans for Alcatel-Lucent. Russo has lobbied for a slimmed down management team, a more streamlined core carrier business and a focus on higher-margin businesses.
“Volumes we are seeing are not what we expected,” Russo said in a conference call. “These are difficult but necessary decisions, and we will manage these reductions with care.”
Chief Financial Officer Jean-Pascal Beaufret said he will leave the company “in coming weeks.” He will be replaced by Hubert De Pesquidoux, previously CFO of Alcatel North America.
MobileCrunch reported earlier this month that Ericsson’s 3rd Quarter Profits (were) down 36%. Ericsson has 45% of the telecommunication equipment market and blames lower profits on a slowdown in equipment investment by mobile phone providers. This ripple is now being reported by smaller companies like Alcatel-Lucent.
The third-quarter loss of 258 million euros was slightly larger than analysts’ expectations, and contrasts to a pro forma net profit of 532 million euros a year ago. Sales in the quarter slumped 11 percent to 4.35 billion euros ($6.27 billion), hurt by lower investments in U.S. wireless networks.
Overall revenues for the year are expected to be flat, but shares of Alcatel-Lucent rose 1.4 percent to 6.72 euros ($9.58) in Paris after the third-quarter news came out. Cheuvreux analyst Remi Thomas doesn’t think the company’s plans go far enough to make it profitable again. He believes revenue is so short of expectation that Alcatel-Lucent needs to save an addition 1 billion euros ($1.44 billion). This would require the company to cut an extra 10,000 jobs.