Alcatel-Lucent to sell assets, lay off thousands
In order to stanch continuing losses, French telecom equipment maker Alcatel-Lucent (NYSE: ALU) has undertaken a €1.25 billion restructuring program that includes asset sales and 5,500 job cuts.
The company reported a net loss of €146 million for the third quarter, its second straight quarterly net loss, and revenues of €3.6 billion, a 2.8 percent drop from the same quarter last year.
Alcatel's submarine cable business and a unit that sells telephone systems to large enterprises are both candidates for sale, three people familiar with the matter told Reuters.
The one bright spot for Alcatel-Lucent was that it beat analysts' forecast of a net loss of €149.1 million and revenues of €3.55 billion, according to a report by Bloomberg.
Alcatel-Lucent has seen its stock value drop close to 65 percent over the past year, and the stock is trading near a 23-year low.
Analysts are predicting further troubles for Alcatel-Lucent. "Stay away from this debt-troubled name," Alexander Peterc, an analyst at Exane BNP Paribas in London, warned in a note, according to Bloomberg.
"The company recognizes implicitly looming liquidity problems," Pierre Ferragu, an analyst at Sanford C. Bernstein, was quoted by Bloomberg as saying.
Standard and Poor's said it may join Moody's Investors Service in reducing Alcatel-Lucent's debt ratings to junk status, citing potentially worsening liquidity, the report noted.
U.S. telecom equipment firms Cisco (Nasdaq: CSCO) and Juniper Networks (Nasdaq: JNPR) are faring much better than their French rival. Juniper reported a net income for the third quarter of $16.8 million, or 3 cents per share, on revenue of $1.12 billion. While Cisco has yet to report its quarterly results (scheduled for Nov. 13), it reported a net income of $1.9 billion for its previous quarter (fourth quarter of fiscal 2012 results) on net sales of $11.7 billion.
Other competitors to Alcatel-Lucent in the global telecom equipment market include Ericsson (Nasdaq: ERIC), Huawei, Nokia Siemens Networks and ZTE. TechNavio predicts a modest 3.6 percent compound annual growth rate for the global telecom equipment market through 2014.
Special report: Enterprise communications in the third quarter of 2012
Alcatel-Lucent mulls asset sales as cash burn rate climbs in Q3