UBS: Alcatel faces mobility decline, culture clash

After revenue declines last year and this year, Alcatel-Lucent’s mobility division will likely see shrinking revenue again in 2008, according to UBS Investment Research analyst Nikos Theodosopoulos.

In a research note this week, the analyst predicted Alcatel-Lucent’s GSM and CDMA businesses would both see negative growth in the year ahead.

The equipment giant’s mobile revenue won’t sink as much next year as it has in recent years, Theodosopoulos said, predicting a 3% decline next year after an estimated 11% decline this year and a 10% decline last year.

He also said “cultural issues” between the two major vendors that merged late last year may be slowing the company down and hampering its effectiveness.

“Our sources suggest that there are still some cultural issues that may be slowing down integration and execution somewhat,” Theodosopoulos wrote. “We don’t see a quick turnaround on these matters but expect the company to actively pursue right-sizing businesses and reducing headcount by an additional 4,000 as previously announced.”

UBS’s lowered expectations for Alcatel-Lucent come less than two months after the vendor announced plans to restructure its operations in the face of a flat top line. The company made changes to its top management team and added 4,000 more job cuts to the 12,500 already announced.

At the time, some analysts said the moves did not address the larger issues facing Alcatel-Lucent, and UBS argued that changes were still needed within the company’s mobile business in particular.

Still, in his research note this week, Theodosopoulos said he expected Alcatel-Lucent’s overall fourth-quarter revenue to be up 16% sequentially and up 18% from a year earlier to 5.1 billion euros.

He expects the vendor’s overall revenue to grow 2% next year to 18 billion euros.