Alcatel to cut 10,000 more jobs

Alcatel announced the layoff of an additional 10,000 employees in conjunction with dismal third quarter results today. The telecom equipment provider expects fourth quarter losses to equal third quarter losses, which would bring the annual loss to about $4.5 billion.

The company posted a three-month net loss of $506.8 million and an operating loss of $194.5 million. Sales fell 18%.

Attributing the news to the telecom industry’s current economic slump, Alcatel said it is implementing aggressive cost-cutting plans to position itself for the eventual upturn in the market.

“They’re taking the same strategy as everyone else. They’ve already begun to pair off places that have really low margins,” said George Peabody, vice president of communications infrastructure for the Aberdeen Group. “If you’re among the old line selling into the traditional telcos and that’s where the bulk of your revenues come from, it’s like getting surgery without getting anesthesia. Lucent, Nortel and Alcatel are all in triage mode.”

Alcatel projected continued weakness in its markets through the first half of 2002. Along with the 10,000 job cuts that will occur in Europe, the company plans to cut fixed costs by 20%.

The company is not alone. Lucent Technologies and Nortel Networks also have been suffering from the slump.

“All of these companies have got to be in rapid assessment mode of their product strategies and unfortunately for Lucent, Nortel and Alcatel, their cash positions," said Peabody. "They don’t have the strength of a Cisco right now so their options are far more constrained.”