Alca-Lu to cut 5k jobs by the end of next year

Paris-headquartered telecoms equipment vendor Alcatel-Lucent has posted a net loss of €254mn for the second quarter on revenues of €3.545bn, and announced a swingeing programme of cuts that will see it exit from unprofitable markets and cut its global workforce by 5,000 by the end of 2013.

While the company retains strong positions in some key market segments, including IP, Next-Generation Optics and Broadband Access, its CEO Ben Verwaayen concedes that the company must be more aggressive in its transformation initiatives if it is to achieve profitability in a deteriorating macroeconomic environment.

Alcatel-Lucent is thus aiming to achieve an additional €750mn in cost reductions, bringing total savings to Euro 1.25 billion by the end of 2013. It plans to achieve this by cutting staff, exiting or restructuring unprofitable Managed Services contracts, exiting or restructuring of unprofitable markets, and managing its patent portfolio as an independent profit centre.

“These times demand firm actions, but as this will involve shrinking our employee base and exiting certain non-profitable contracts we will use The Performance Program to execute in a measured fashion,” said Mr. Verwaayen. “However 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.”

On an operational level, revenues for the Networks segment fell hardest by 9.9% annually to reach €2.23bn, while revenues for the S3 segment (software, services and solutions) fell 1.7% to €1.053bn, and revenues for the Enterprise business fell 1.5% to €191mn.

While these are unhappy times for Alcatel-Lucent, it may be some small comfort to know that its rivals are also suffering: Nokia Siemens Networks posted a €227mn operating loss for the second quarter of this year and has been forced to make much larger cuts to its global workforce, with 17k jobs to go by the end of 2013.

Chinese firms ZTE and Huawei have both seen a fall in profits recently, with the latter revealing yesterday that operating profits fell 22% for the six months to June.

Ericsson saw an even greater slide of 63% for its second-quarter net profits on an annual basis – though it remains comfortably in the black, for now.

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