Alcatel-Lucent Revenue Down, More Cuts Planned

Blaming integration efforts, Alcatel-Lucent on Tuesday said it expects to report a sizable drop in revenue for the fourth quarter of 2006, adding that it will add cost reduction steps beyond its planned cut of nearly 9,000 workers.

The newly merged entity said it expects unaudited revenue for the fourth quarter to be $5.76 billion, down about 16 percent from $6.84 billion for the same period a year ago. The company, which was formed in November, expects operating profit for the full year to be down from $1.8 billion to $1.3 billion.

The reported results for the fourth quarter will include Alcatel stand-alone operations for October and November and the combined operations of Alcatel-Lucent for December. The company will provide its fourth quarter and full year 2006 results Feb. 9.

“2006 was an extraordinary year in many ways for our company,” said Patricia Russo, CEO of Alcatel-Lucent. “We completed the first and largest merger to date in our industry, we enhanced our wireless portfolio through the acquisition of Nortel’s UMTS radio business.

“In the past few months, these moves created short-term uncertainty for our customers and for our people as we worked to develop the combined company’s product portfolio and new organization structure,” explained Russo. “This uncertainty together with the work required to close the merger significantly impacted the business.”

Alcatel-Lucent said that “despite the challenges we faced during the quarter, considerable progress was made in planning the convergence of product lines, the optimization of synergies and the preparation of cost cutting programs.”

The cost cutting programs initially called for staff cuts of roughly 10 percent or nearly 9,000 workers worldwide. Alcatel-Lucent said it plans additional steps but did not detail them, raising questions as to whether more staff would be let go.

Alcatel-Lucent said it has decided to take additional actions to further reduce its cost structure. The company said with the initial cost synergies plan it expects to achieve combined cost savings of at least Euro 600 million in 2007, which is Euro 200 million higher than its initial target for 2007.

Alcatel-Lucent www.alcatel-lucent.com

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