Alcatel-Lucent posts loss, deepens job cuts

Alcatel-Lucent SA, the world's largest telecommunications-equipment company, on Wednesday said it will cut a further 4,000 jobs and replace its chief financial officer as part of a turnaround plan unveiled as it posted its third straight quarterly loss.

The additional job cuts bring total workforce reductions to 16,500 and will help save an extra 400 million euros ($577 million) by the end of 2009. Jean-Pascal Beaufret, the group's CFO, is stepping down to "pursue other opportunities" and will be replaced by the current head of the enterprise division, Hubert de Pesquidoux.

The moves announced Wednesday are part of a much anticipated turnaround plan requested by the board and signal Alcatel-Lucent's determination to accelerate its restructuring. But the initiatives received mixed reviews from analysts who had called for much larger job cuts and for the sale of parts of the company's portfolio.

News of the reorganization came as the gear maker posted an adjusted net loss of 258 million euros, or 0.11 euros a share, in the third quarter. It earned 532 million euros, or 0.23 euros a share, a year earlier. An exact comparison with last year's third-quarter results can't be made as the two companies had not yet merged.

Revenue fell 11% year-over-year to 4.35 billion euros. However, it rose 2% sequentially. The average forecast of eight analysts polled by Dow Jones Newswires was for a net loss of 223 million euros and sales of 4.4 billion euros. Gross margin improved to 34.2% from 33.4% in the second quarter.

Turning to the fourth quarter, the group said it expects a "solid ramp up" in revenue from the third quarter. It also said revenue would be flat this year, updating an earlier prediction that sales would be unchanged to slightly up.

The company confirmed it's on track to achieve pre-tax cost savings of 600 million euros this year.

Alcatel-Lucent shares, in New York trading, rose 22 cents to $9.61. See Europe Markets.

Some slowdown in North American spending

Alcatel-Lucent shares have lost roughly 40% so far this year. The company, created from the merger of France's Alcatel and Lucent Technologies of the U.S., has struggled to bring about the promised scale benefits and to become a more formidable competitor to Sweden's Ericsson
and aggressive Chinese vendors such as ZTE Corp.

Alcatel-Lucent has issued three profit warnings since its merger in December 2006.

But its competitors haven't been immune to operational hiccups either.

A profit warning from rival Ericsson earlier this month sent its shares down roughly 25% in a single day and cast doubt on the level of demand for mobile-network upgrades, particularly from North America. See archived story.

Alcatel-Lucent Chief Executive Patricia Russo on Wednesday said market conditions remain difficult, "with continued pressure on revenues and margins due to intensified competition and some slowdown in spending in North America."

Analysts fret over CFO's departure

The news of Beaufret's departure wasn't cheered by analysts.

Richard Windsor of Nomura, who has a neutral rating on Alcatel-Lucent, said the executive is widely regarded as the best CFO in the industry.

His departure, he said, "is a blow upon a bruise" and he warned that the executive's "steady hand and pragmatic approach will be sorely missed at a time when Alcatel-Lucent needs him the most."

ABN Amro analysts also expressed concern at Beaufret's departure, calling the news "a bit worrying" and saying it hurts the credibility of the new financial targets.

Beaufret is the third senior executive to leave the company since the end of the summer.

Regarding the additional 400 million euros of cost savings unveiled Wednesday, Bear Stearns analysts noted that the challenge will be to realize them rather than reinvest them, given current market conditions and the company's growing footprint. The company has been forced to reinvest most of its cost savings to date to remain competitive.

As part of its organizational revamp, Alcatel-Lucent said it has set up a seven-member management committee that will report directly to Russo and replace a group of 21 executives.

The committee will be charged with assuring execution and business performance, creating a "more focused and efficient operating model."

Russo said she selected "every member" of the team, which includes regional and divisional heads.

Turning to individual divisions, revenue rose 5% to 1.52 billion euros at the fixed-line carrier business. It dropped 24% to 1.28 billion euros at the wireless division. The company attributed the decline in wireless sales to strong comparisons in the year-ago quarter.

Russo said in a conference call that the company has no intention of exiting any significant parts of its portfolio of products and will remain both in wireless and wireline.

At the convergence unit, revenue fell 41% to 346 million euros. While it has gained market share in next-generation products, that business is still not big enough to offset the declines in demand for traditional equipment, the company said.

Sales at the enterprise unit rose 5% to 380 million euros.

Russo said Alcatel-Lucent has no intention of selling the division

Alcatel-Lucent and Sagem to Jointly Develop 3G Femto Cell Base Stations

Alcatel-Lucent and France's Sagem say that they are collaborating on the commercial development of a3G femto cell base station platform. Based on Alcatel-Lucent's "flat IP (Internet Protocol)" architecture, the UMTS/HSPA BSR Femto flattens the mobile network by integrating and collapsing the UMTS/HSPA radio access network elements, including the base station and radio network controller (RNC), into a single, small unit about the size of a TV set-top box.

"The UMTS/HSPA BSR Femto offers significant advantages over competing solutions due to the fact that it combines all radio access functions into a single, compact device, eliminating the need to deploy additional RNCs," said Alain Biston, president of Alcatel-Lucent's W-CDMA activities.

"By taking advantage of Sagem Communications' expertise in the development of consumer electronics products to help package and manufacture the BSR Femto for mass market consumption, we will realize significant time to market and cost benefits," Biston added.

Through this collaboration, Alcatel-Lucent and Sagem Communications have already achieved significant milestones in the BSR Femto development effort, including the completion of voice and data calls, lab demonstrations with key customers and the establishment of a program of field trials (to be conducted in the fourth quarter of this year).

Under the collaboration agreement, Alcatel-Lucent will provide its flat IP and UMTS/HSPA expertise, networking equipment and software and end-to-end integration and support for the development of the BSR Femto. Sagem Communications will lend its enhanced home networking capabilities and expertise in developing IP, VoIP and DSL solutions for the mass market. The BSR Femto uses a DSL connection in a home or office building to backhaul voice and data traffic onto an operator's existing UMTS/HSPA network, enabling operators to offload traffic from the macro-network. It supports circuit-switched voice and data applications, packet-switched data applications, HSPA and IP-Multimedia Subsystem (IMS)-based networks. It also works with all 3GPP-compliant UMTS/HSPA handsets.

Two versions of the BSR Femto are planned for UMTS/HSPA networks -- a standalone 3G unit with Ethernet connectivity to a DSL modem and an integrated unit that supports UMTS/HSPA, DSL and WiFi. Alcatel-Lucent is also developing a CDMA/EV-DO based BSR Femto.

Posted to the site on 9th October 2007

Alcatel-Lucent Losing 3G Business to Ericsson

Alcatel-Lucent shares fell by more than 2% in early trading this morning after a report in the Financial Times said the telecom networking company is losing business to rival Ericsson. The paper reported that AT&T was doing more business with Ericsson.

In 2004, AT&T awarded a $2 billion infrastructure contract to Ericsson, Lucent and Siemens to upgrade its U.S wireless network. Under the original terms of the deal, Ericsson was to get about $900 million, Lucent $700 million and Siemens $400 million, but according to the paper, Alcatel-Lucent delayed delivering the 3G technology and Ericsson "stepped in." Ericsson's portion of the contract now exceeds 50%.

The report also said that AT&T had considered dropping Altactel-Lucent from the contract entirely, but so far has kept the network supplier.

In the report, Alcatel-Lucent responded by saying "We continue to be a critical WCDMA supplier to AT&T."

Alcatel-Lucent, Kyocera work on WiMAX mobile broadband

PARIS – Alcatel-Lucent and wireless handset manufacturer Kyocera Wireless Corp. (San Diego, California) have extended their collaboration with the signature of an agreement on the development of end-to-end WiMAX mobile broadband solutions.

Under the terms of the agreement, both parties said they aim to accelerate the development of WiMAX devices with enhanced mobility features, as well as multi-mode terminals that can enable seamless interoperability between WiMAX networks and cellular or Wi-Fi networks.

Their collaboration includes the establishment of specifications, the development and integration of WiMAX solutions and the creation of an interoperability testing (IOT) program to make sure that Kyocera's WiMAX devices "can operate smoothly" on Alcatel-Lucent’s infrastructure, the two partners agreed.

Ericsson Continues to Gain Market Share

Ericsson shares rose early Tuesday after Chief Executive Carl-Henric Svanberg said the company continues to gain market share and to outperform the competition.

"We will continue to drive profitability growth and gain further market share. We are in a good market position and we continue to gain market share and outperform the competition," Svanberg said at a strategy day for investors and analysts.

Svanberg said Ericsson was benefitting from integration issues at rivals Alcatel-Lucent and Nokia Siemens Networks, a joint venture between Nokia and Siemens.

Ericsson has well over 40% market share in the GSM/WCDMA third-generation wireless technology sector, Svanberg said, while he said new reports from analysts say it may be as much as 45%.

At 0940 GMT, Ericsson shares were up 3%, or SEK0.74, at 25.22.

Commenting on the strategy presentation, Enskilda Bank said there was little new in the presentation, describing it as largely a reiteration of previous comments. But given that Ericsson has been under pressure recently, analysts said, management's confident tone could account for the share strength.

Ericsson's scale and operational excellence plans would help it continue to grow, Svanberg said.

"We can live with fairly limited cost advantage that the Chinese (manufacturers) have, but not if they work smarter than us. This is why we're working with operational excellence," Svanberg said.

Cash-flow conversion is also expected to improve slightly in 2007, as the company improved how it managed large infrastructure projects in Asia and the Middle East, chief financial officer Karl-Hendrik Sundstrom said.

Ericsson, the world's largest wireless infrastructure company by revenue, earlier reaffirmed it expects the GSM and WCDMA market to show mid-single-digit growth in 2007.

It also earlier said, in material prepared ahead of the strategy day, that it expects the professional services market to continue to show good growth.

Sony Ericsson's outgoing President Miles Flint also told Dow Jones Newswires that he expects the global mobile phone market to reach 1.1 billion handsets by the end of 2007.

Sony Ericsson is a joint venture between Ericsson and Sony Corp. (SNE)

Alcatel-Lucent posts net loss of €336 million in Q2

PARIS – Impacted by merger costs and writedowns, Telecommunications equipment provider Alcatel-Lucent reported a net loss of €336 million for the second quarter of 2007, compared to a profit of €302 million for the same period last year.

For the second quarter of 2007, Paris-based Alcatel-Lucent announced revenues of €4.33 billion, up 0.5 percent year-over year at constant Euro/USD exchange rate, or a 4-percent decrease at current rate.

Commenting on the quarterly sales, Alcatel-Lucent's CEO Patricia Russo declared: "This quarter, our revenues sequentially grew by a solid 13 percent at a constant Euro/USD exchange rate, with the strongest performance in the wireline and services businesses. From a regional perspective, we saw strong growth in Asia Pacific."