- The Washington Times - Thursday, November 1, 2007

PARIS (AP) — Alcatel-Lucent SA, struggling since the deal that formed the company, disclosed plans yesterday to slash 4,000 more jobs and shake up top management as the telecommunications equipment maker reported a third straight quarterly loss.

Chief Executive Officer Patricia Russo, under pressure to produce better results, said business levels were below expectations. Annual revenue is likely to be nearly flat, the company said.

The much-anticipated new plans include a slimmer management, a streamlined core carrier division and a focus on higher-margin areas.

The French-American company”s chief financial officer also will step down.

Alcatel-Lucent said the latest restructuring is designed to save an additional $578 million by 2009. The job cuts are in addition to the 12,500 announced in February and together amount to 20 percent of the 82,500 workers employed by France”s Alcatel and U.S.-based Lucent Technologies at the time of the deal.

Ms. Russo — who took over after Alcatel bought Lucent last November — denied reports that she had been given an ultimatum by the board, saying it is fully supportive of her plans to expand the current three-year, $2.45 billion cost-cutting program.

Analysts have been calling for Alcatel-Lucent to shed its less-profitable businesses.

While we are clearly pruning our portfolio and refocusing some of our R&D; investment, we are remaining in the key segments we believe are necessary for us to be successful, Ms. Russo said.

The company”s shares rose 1.1 percent to $9.66 in Paris after jumping as much as 4.2 percent earlier.

Alcatel-Lucent shares have plummeted 38 percent this year as investors got jittery over the repeated profit warnings. The drop has erased about $13 billion off Alcatel-Lucent”s market capitalization, negating the value of Lucent before the deal.

The company has already shed 5,000 workers this year, and Ms. Russo declined to specify where the new job cuts would take place.

Spokesman Dick Muldoon in New Jersey said the company is not disclosing where the new round of job cuts will occur, either by geographic region or job category.

We didn”t say what the initial 12,500 [job cuts] and we”re not going to say on this, he said.

Unions in France, which lost 1,468 posts, or 12 percent of the total in the initial plan, planned a one-hour strike yesterday to protest the new cutbacks.

To say that the American dream is a fiasco would be a mild euphemism, the Confederation Generale du Travail union said. The merger with Lucent, without being the only cause, is revealing itself as a key factor in the company”s descent.

After overseeing the combined company”s first year, Chief Financial Officer Jean-Pascal Beaufret said he will leave the company in coming weeks. He will be replaced by Hubert De Pesquidoux, previously chief operating officer of Alcatel North America.

To facilitate decision making, Ms. Russo also said she has created a seven-member management committee reporting directly to her.

The Alcatel-Lucent merger was designed to boost margins through cost and research and development savings, while improving the joint company”s pricing power with telecom operators, its largest customers. But intense competition in the industry means many of the savings have been used on discounts passed on to customers.

We continue to anticipate that there will be price erosion in the telecom-equipment market, Ms. Russo said.

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