Alcatel-Lucent SA, France’s largest phone-equipment supplier, plans to cut 5,000 jobs after posting a loss, as Chief Executive Officer Ben Verwaayen is under pressure to accelerate his turnaround effort. The stock fell.
The cuts, equal to about 6 percent of staff, are part of a plan to save an additional 750 million Euros ($911 million), the Paris-based company said today. The second-quarter net loss, Alcatel’s first in five quarters, was 254 million Euros.
Verwaayen, who started as CEO in 2008, is forced to make additional cuts after thousands of job eliminations, reductions in administrative costs and supply-chain changes failed to keep Alcatel-Lucent profitable. Sales are plummeting as European carriers cut spending and competition from Asian rivals such as Huawei Technologies Co. and ZTE Corp. weighs on prices.
“They have to deliver and fast,” Eric Beaudet, an analyst at Natixis Securities in Paris, said in a phone interview. The 5,000 cuts “are a start.”
Shares of Alcatel-Lucent fell 7.1 percent to 81 cents at 9:33 a.m. Paris time. Through yesterday, they had lost 79 percent since Verwaayen was named CEO less than four years ago. Its market capitalization is 2 billion euros, compared with rival Ericsson AB’s 200 billion kronor ($28.7 billion).
Alcatel-Lucent — created by the 2006 merger of Alcatel SA and Lucent Technologies Inc. — said on July 17 that it won’t meet its goal of improving its full-year adjusted operating- profit margin this year, from the 2011 level of about 3.9 percent. Its shares fell 20 percent on that day, contributing to a 28 percent plunge for the year. Shares of Stockholm-based Ericsson have declined 14 percent.
The cuts, combined with previously announced reductions, will save 1.25 billion Euros by the end of next year, Alcatel- Lucent said. The company, which posted its first annual net income in six years in 2011, said it will exit or restructure unprofitable markets and contracts.
“It is clear from the deteriorating macro environment and the competitive pricing environment in certain regions challenging profitability that we must embark on a more aggressive transformation,” Verwaayen said in the release.
Sales fell 7.1 percent to 3.5 billion Euros, in line with the preliminary number Alcatel-Lucent posted last week. Second-quarter operating loss, adjusted for some items, was 31 million Euros, compared with a profit of 87 million a year earlier. The net loss was 11 cents a share, compared with net income of 43 million Euros, or 2 cents a share, a year earlier.
Phone companies in the U.K., Germany, Italy and France have been reluctant to invest as much as their counterparts in the U.S. and Asia in faster networks because of Europe’s sovereign debt crisis and unfavorable regulatory decisions, Verwaayen said in an interview in May.