Along with the news that it had ended talks with Lucent Technologies Inc. over a possible merger, Alcatel SA also announced Tuesday a restructuring of the company that would come complete with a 3 billion euro (US$2.56 billion) loss for its second quarter.
"We had initially expected a net income loss of around 2 billion but that's now 3 billion euros; about two-thirds of that comes from restructuring and the rest from our purchase of the Canadian telecommunications company, 360Networks Inc. We expect it to be a one time, non-cash charge," said Alcatel spokesman Klaus Wustrack.
Alcatel is expecting its second quarter operating income to come in just above 100 million euros, Wustrack said.
Alcatel issued the profit warning hours after announcing it was no longer in merger talks with the American communication equipment vendor. Though the companies did not outline why the proposed merger -- valued at $32 billion -- failed, various media reports point to Lucent's insistence on a marriage of equals as the primary problem. Alcatel blamed the economic slowdown in the U.S. and an ailing European telecommunication market for its failing fortunes, and said it would now re-focus on its carrier networking and optics divisions along with its space activities. "That will represent about 80 percent of our business going forward," Wustrack said.
Alcatel will exit the mobile phone market, closing one of its two mobile handset manufacturing plants while it looks to sell the second plant, Wustrack said. The company is also exploring the possibility of selling its enterprise division, Wustrack said.
Additionally, the company on Tuesday cut in half expectations for its Alcatel Optronics division, and now expects sales growth to be between 20 percent and 25 percent for the year. Last month, the company had announced expected growth in Alcatel Optronics, which has its own tracking stock, to be 50 percent, Wustrack said.