Alcatel to cut 5,000 jobs, reduce costs

PanARMENIAN.Net - Telecom gear maker Alcatel-Lucent said it would cut 5,000 jobs and seek to exit or restructure unprofitable markets as part of a program to lower costs by 1.25 billion euros ($1.52 billion) by the end of next year, Reuters reported.

The move comes after the Franco-American group warned last week that it would miss its 2012 profit margin target and pre-announced an adjusted operating loss of 40 million euros on sales above 3.5 billion in the second quarter.

Chief Executive Ben Verwaayen is struggling with a slowdown in spending on network equipment and competition from Huawei Technologies Co. and Ericsson, while trying to prevent Alcatel-Lucent from slipping into the red this year.

It posted its first annual profit last year since it was formed in the 2006 merger of Alcatel SA and Lucent Technologies, but Verwaayen was not able to deliver on a promised turnaround plan with cash burn and costs remaining a burden.

"Despite having demonstrated our ability to deliver operational profitability, it is clear...that we must embark on a more aggressive transformation," said Verwaayen in a statement. "These times demand firm actions."

Alcatel-Lucent shares have plummeted nearly 25 percent this year to reach their lowest point ever, closing at 0.86 euros on Wednesday. In comparison, the European technology index has risen 4.1 percent this year.

The job cuts will affect 6.4 percent of Alcatel-Lucent's 78,000 employees. The group will also seek to get rid of unprofitable services contracts in which it manages networks for operators, squeeze more money out of its patent portfolio, and exit or restructure in countries where it is weak.

Alcatel-Lucent also gave a new annual profit target of posting a second-half adjusted operating margin better than the first half when it stood at minus 3.7 percent. It confirmed its prior target of aiming for a "strong positive net cash position at the end of 2012".