Alcatel SA, Europe's biggest maker of telecommunications equipment, forecast sales will drop as much as 30 percent this quarter as demand wanes for fiber-optic parts and switching gear. It had a seventh straight quarterly loss.
The net loss was 1.12 billion euros (US$1.2 billion), or 0.93 euros per share, in the fourth quarter, compared with a loss of 1.5 billion euros, or 1.28 euros in the year-earlier period. The French company's stock fell as much as 8.5 percent.
"[This year] will still be a difficult year," said Chief Financial Officer Jean-Pascal Beaufret on a conference call. "We're starting off from a very low level after the economic downturn in 2002."
Alcatel, which has racked up 9.9 billion euros of losses since April 2001, is eliminating 40 percent of its workforce, reducing inventories and cutting other costs as it tries to break even before goodwill costs by the end of this year. Rival Ericsson AB yesterday said it sees no signs the industry slump is over.
Telecommunications equipment is "a disaster," said Andrew Bell, who helps manage US$4.9 billion as head of European equity strategy at Carr Sheppards Crosthwaite in London, in a Bloomberg TV interview. The phone companies are cutting investments and that is "gloom for equipment suppliers."
The company's shares were down 7.1 percent to 6.24 euros as of 9:22am on the Paris stock exchange yesterday. That compares with a record high of 97.15 euros in September 2000.
The stock, the worst performer on the Dow Jones Euro Stoxx50 Index last year, has fallen 61 percent in the past 12 months.
Chief Executive Serge Tchuruk forecast in a faxed statement that the markets Alcatel is in will shrink on average 15 percent this year. That's more than the 10 percent decline Gartner Inc's Dataquest unit predicts for the global telecommunications market last year, after sales dropped 20 percent to US$149 billion last year.
Sales will fall 25 percent to 30 percent in the first three months of the year because of a "steep decline in world markets" and the dollar's slump against the euro, Alcatel said in a faxed statement. The dollar has fallen more than 20 percent against the euro compared with the average exchange rate in the first quarter last year, Alcatel said. Alcatel won't pay a dividend for last year.
Like Stockholm-based Ericsson, which yesterday posted its seventh consecutive quarterly loss, and Nortel Networks Corp, Alcatel has suffered because phone operators such as France Telecom SA are focusing on reducing debt rather than building new networks.
France Telecom, which has 70 billion euros of debt, is cutting capital expenditure by 10 percent this year. Its Orange SA mobile unit is lowering spending by a quarter and withdrawing from Sweden. Telefonica SA ended its ambitions for faster mobile networks in Germany, Italy, Switzerland and Austria.
To weather the slump, Alcatel is reducing its workforce to 60,000 at the end of this year from 99,000 at the end of 2001. The company also plans to shed assets worth 1 billion euros and is reducing the amount of money it has tied up in its business by getting customers to pay more promptly.
Alcatel had a net cash position of 326 million euros at the end of last year. Because of cost cuts, the French company's operating loss in the quarter should narrow compared with the first quarter of last year, the company said.
In the fourth quarter, sales fell by a third to 4.5 billion euros. However, it was the first sequential sales increase in eight quarters and sales beat its expectations because of demand for wireless-network equipment and high-speed Internet gear. Alcatel posted a profit from operations of 20 million euros in the fourth quarter, compared with a loss of 368 million euros in the same quarter a year earlier.
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