Alcatel-Lucent SA (ALU), the French phone- equipment maker whose stock is trading near a 23-year low, will cut its home-country workforce by about 15 percent as it focuses a reorganization on a sluggish European market.
Alcatel plans to shed 5,500 positions worldwide as part of a 750 million-euro ($984 million) savings program, primarily affecting sales, marketing and administrative employees, said Simon Poulter, a spokesman. More than half of the departures will take place in the Europe, Middle-East and Africa region, and include about 1,400 jobs in France.
Chief Executive Officer Ben Verwaayen, heading into his fifth year in the post, is accelerating a turnaround bid after thousands of earlier job cuts, restructuring and asset sales failed to make Alcatel-Lucent profitable. The Paris-based company outlined plans for the reorganization in July, when it estimated 5,000 jobs would be eliminated and targeted cost reductions in supply-chain management.
“These are difficult decisions, but are necessary for the long-term health and sustainable profitability of the company,” Poulter said.
Alcatel-Lucent jumped 7.9 percent to 86.3 cents at the close of trading in Paris, for the biggest gain on France’s benchmark CAC 40 Index. (CAC) The stock has fallen 29 percent this year, and was at the lowest price since at least 1989 on Oct. 9.
Some phone-industry competitors have been more aggressive in scaling back their workforces. Nokia Siemens Networks, the network-manufacturing venture of Nokia Oyj (NOK1V) and Siemens AG (SIE), said a year ago that it would cut 17,000 jobs, or 23 percent of its workforce.
In France, where Alcatel employs 9,000 people out of a global workforce of 78,000, Verwaayen faces a tough stance from President Francois Hollande, a Socialist elected in May after pledging to block “a parade of firings.” Alcatel Chairman Philippe Camus was called in by government officials for a meeting in mid-2012 to discuss the manufacturer’s plans to eliminate positions.
“We plan to fight back against these firings,” the CFDT union said today in a statement. “We’ve already contacted ministry officials and ask the government to take charge.”
French phone companies should be “patriotic” when choosing who will supply them with network equipment, Digital Economy Junior Minister Fleur Pellerin told a parliamentary commission yesterday. Banning Chinese gear providers, she said, is one way government could support companies like Alcatel- Lucent.
Intensifying competition from Asian rivals Huawei and ZTE Corp. (000063) has weighed on Alcatel-Lucent, which was formed in the 2006 merger of French-based Alcatel SA and American company Lucent Technologies.
Former chiefs Pat Russo and Serge Tchuruk, who oversaw the merger, handed Verwaayen an unprofitable company with a high cost base. Plummeting sales of phone equipment in Europe have added to Verwaayen’s challenges.
Alcatel, which earned an annual profit for the first time in five years in 2011, posted a loss of 254 million euros in the second quarter of 2012. Its European business suffered the biggest decline during that period, with sales down 15.6 percent, while group sales shrank by 7.1 percent.
The company is expected to report a net loss of 148 million euros in the third quarter, according to data compiled by Bloomberg based on seven analyst estimates. Sales are expected to fall 5.7 percent to 3.58 billion euros.
To contact the reporter on this story: Marie Mawad in Paris at email@example.com