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In a profit warning, the company said it would reduce staff levels to 60,000 by the end of next year as it trimmed 28 percent of its current 83,000-strong workforce. The 10,000 new cuts come on top of 13,000 announced in June, and if the targets are met, the business will have shed 39,000 workers between December 2001 and December 2003. To make the cuts, Paris-based Alcatel said it would take a EUR500 million provision.
In Ireland the company employs around 85, mostly at a network operations support centre in Cork. It also has a sales and marketing office in Dublin. A spokesperson for the company said that it was unclear whether Irish jobs would go, saying the company has "an ongoing review of its operations underway and is always looking to increase efficiencies."
However, he also noted that substantial costs have already taken place in Ireland this year, suggesting there is little room for more Irish Alcatel cuts. In February 2002 the company cut around half of its Irish workforce and closed a software centre in Cork and a logistics centre in Shannon.
Announcing the profit warning, Alcatel claimed that the continued "deterioration of telecom markets" would cut into second half sales, which would be around 10 percent lower than the first half of 2002. The third quarter will be especially weak, with sales down 15 percent sequentially.
Alcatel also said that in order to reach breakeven status on a quarterly basis, it would have bring in sales of EUR3 billion every three months, equating to a yearly run rate of EUR12 billion. This is more than 25 percent below the current level of business, the company said.
Despite the warning, and the job-cutting news, Alcatel shares were on the rise on Friday, up over 11 percent in Paris to EUR2.80 by lunchtime. The share price boost could not come at a better time for the company, which has experienced a 44 percent slide in stock prices over a period of nine straight days.
The announcement, though dramatic, is broadly in line with what competitors have been experiencing as the market for telecommunications infrastructure products continues to weaken. Lucent and Nortel on the fixed line side, and Ericsson and Nokia on the wireless side, have seen the market for their network hardware products crumble, forcing all of these players to cut jobs.
The woes at Alcatel could certainly have consequences for Chief Executive Serge Tchuruk, who took over in 1995 and has made a number of disposals designed to cut debt, which by December 2001 had gone as low as EUR2.66 billion. Nonetheless, Vivendi chief Jean-Marie Messier's departure and Michel Bon's resignation from France Telecom have caused a few shareholders to eye Tchuruk as a possible candidate for redundancy unless he can turn around the fortunes of the struggling company, and do so quickly.
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