At the same time as announcing flat operating profits for 1998, French telecommunications equipment manufacturer Alcatel said yesterday it planned to cut 12,000 jobs worldwide as part of a massive restructuring, a spokesman confirmed.
In line with preliminary figures released in January, Alcatel yesterday reported final operating income, excluding one-time gains, of 997 million euros ($A1.7 billion) for the 1998 fiscal year, up just slightly from 900 million euros ($A1.6 billion) in 1997.
Alcatel attributed the less-than-stellar results to the negative impact of economic crises around the world, as well as a slow-down in sales of voice switching equipment to telecom operators. This soft demand for switching equipment, as well as slow sales in energy cables and telecom components, should continue throughout the first half of 1999, Alcatel officials said.
While spokesman Christophe Lachnitt said Alcatel is streamlining operations in its hardware businesses due to sagging hardware sales in the global telecommunications market, he wouldn't confirm which areas of the company would be hardest hit with layoffs. However, he did say the job cuts would result in savings of 300 million euros over the next two years.
Taking into account a 2.1 billion euro gain from the sale of its subsidiary Alstom/Cegelec, as well as restructuring costs of 410 million euros, net income for 1998 was 2.3 billion euros, in line with preliminary figures. Earnings per share were 13.16 euros, up from 4.4 euros in 1997.
Final revenue for the year were 21.3 billion euros, up 6 per cent from 20.1 billion euros in 1997 -- also equivalent to preliminary estimates.
Driven by a surge in Internet traffic, the transport and access branch of the telecom sector saw the greatest increase in sales during the year, accounting for 6.2 billion euros, up 41.5 per cent from the previous year. Income from operations in the transport and access branch grew a whopping 74.5 per cent to 438 million euros, up from 251 million euros in 1997. Revenue from telecom networking grew the least, at a 0.5 per cent increase year on year.
Alcatel's cables and components division, which manufactures telecom components for fixed-line operators as well as energy cables, suffered during 1998 from weak demand. Revenue from energy cables decreased 12. 1 per cent year on year, while telecom components sales fell 2.7 per cent in 1998.
Going forward, Alcatel plans to place more emphasis on the rapidly growing telecommunications networking sector, including next-generation IP (Internet Protocol) networks, ADSL (asymmetric digital subscriber line), mobile communications and converged voice and data networks, the company said.
Geographically, Alcatel's sales increased the most in North America in 1998, jumping 23.8 per cent year on year, which melds well with the French company's plans to build up its US presence. Alcatel has recently gone on a stateside spending spree, acquiring US companies that it hopes will help it gain a foothold in the market there for converging voice and data networks. Earlier this month, Alcatel acquired data networking company Xylan for $US2 billion, followed by an announcement two days later that it would acquire remote access equipment company Assured Access Technology for $350 million. Prior to that, Alcatel had also acquired Packet Engines, a Spokane, Washington-based routing switch maker, in October 1998.
Meanwhile, sales in Europe were a mixed bag. In Germany, sales declined 22 per cent in 1998, compared with 1997, but in France -- still Alcatel's largest market in terms of overall revenue -- sales increased 11.7 per cent. The economic crisis in Asia caused sales there to fall 6.9 per cent in 1998.