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Alcatel-Lucent's cutbacks deepen

The firm plans to trim 4,000 more jobs and shuffle management.

November 01, 2007|From the Associated Press

PARIS — Alcatel-Lucent, struggling since the deal that formed the company, disclosed plans Wednesday to slash an additional 4,000 jobs and shake up top management as the telecom equipment maker reported a third straight quarterly loss.

Chief Executive Patricia Russo, under pressure to produce better results, said business levels were below expectations. Annual revenue probably will be nearly flat, the company said.

The much-anticipated new plans include a slimmer management, a streamlined core carrier division and a focus on higher-margin areas.

The French-American company's chief financial officer, Jean-Pascal Beaufret, also will step down.

Alcatel-Lucent said the latest restructuring was designed to save an additional 400 million euros ($578 million) by 2009. The job cuts are in addition to the 12,500 announced in February and together amount to 20% of the 82,500 workers employed by France's Alcatel and U.S.-based Lucent Technologies at the time of the merger.

Russo -- who took over after Alcatel bought Lucent last November -- denied reports that she had been given an ultimatum by the board, saying it is "fully supportive" of her plans to expand the current three-year, 1.7-billion euro ($2.45 billion) cost-cutting program.

Analysts have been calling for Alcatel-Lucent to shed its less-profitable businesses.

"While we are clearly pruning our portfolio and refocusing some of our [research and development] investment, we are remaining in the key segments we believe are necessary for us to be successful," Russo said.

The company's shares closed up 1.1% at 6.70 euros ($9.66) in Paris after jumping as much as 4.2% in earlier trading.

The shares have plummeted 38% this year as investors got jittery over repeated profit warnings. The drop has erased $13 billion of Alcatel-Lucent's market capitalization, negating the value of Lucent before the deal.

The firm has already shed 5,000 workers this year, and Russo declined to specify where the new job cuts would take place.

The Alcatel-Lucent merger was designed to boost margins through cost and research and development savings while improving the joint company's pricing power with telecom operators, its largest customers.

But intense competition in the industry means many of the savings have been used on discounts passed on to customers.

"We continue to anticipate that there will be price erosion" in the telecommunications equipment market, Russo said.

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