Alcatel slashes losses for fourth quarter, full year

Cost cutting enabled Alcatel to reduce by more than half its net loss for the fourth quarter 2003 and full year compared to a year earlier. The Paris company also expects to see sales recover in 2004, it reported Thursday.

The French telecommunications equipment manufacturer made a net loss in the fourth quarter of €524 million ($658 million as of Dec. 31, 2003, the last day of the period being reported) on sales of €3.77 billion, compared to a loss of €1.11 billion on sales of €4.51 billion a year earlier. The loss includes charges of €524 million for restructuring and €210 million amortization of goodwill, the company said.

For the full year, the net loss fell to €1.94 billion on sales of €12.5 billion, compared to a loss of €4.75 billion on sales of €16.5 billion in 2002.

In breaking down those results segment by segment, Alcatel restated results for earlier periods to exclude its optronics and battery divisions, which were sold during the year.

The biggest improvement in performance came in the company’s fixed networks segment, where it transformed an operating loss of €155 million in the fourth quarter of 2002 into an operating profit of €142 million in 2003. Sales fell to €1.65 billion for the quarter, down from €2.01 billion a year earlier. There was strong demand for the company’s broadband access equipment, the company said, reporting that it delivered 5.1 million DSLs during the quarter.

Sales declined slightly at the company’s private communications segment, but operating income for the quarter improved slightly, to €95 million compared to €93 million a year earlier. The segment includes enterprise telecommunications and videoconferencing equipment, along with rail communication systems, and accounts for €1.1 billion (around 30%) of Alcatel’s sales. An increasing proportion of office telecommunications equipment sales are of IP systems, the company said.

In the mobile communications segment, which accounted for 29% of revenue for the quarter, Alcatel deployed 1,500 3G base stations for its network operator customers. Operating income fell to €122 million for the quarter, compared to €131 million a year earlier.

Over half of Alcatel’s sales are made in Europe, isolating it to some extent from fluctuations in the dollar-euro exchange rate. Western Europe accounted for 45 percent of sales in the fourth quarter, other European countries 8%, North America 14%, Asia 18% and the rest of the world 15%.

The company expects sales to resume growth in 2004, accelerating after the first quarter which is seasonally a slow one, with a return to profitability (before charges for amortization of goodwill) for the full year. The company is investing in research and development of IP services routers, and expects its carrier customers to upgrade their ATM networks to new ones based on IP/Multi-protocol Label Switching.