Alcatel accelerates cut-backs, despite increasing market share

20 September 2002 -- Despite growing its market share in intelligent optical hardware from 9% in Q1/2001 to 22% in Q2/2002, Alcatel plans to cut staffing further from the current 99,000 to 60,000 by end-2003.

20 September 2002 -- Due to "further deterioration of telecom markets" Alcatel plans to accelerate its restructuring program to keep on track for returning to profit in 2003.

Even though present break-even trends come close to the anticipated Q4 sales level, Alcatel's aims to reach a quarterly sales break-even point approaching EUR3bn by end-2003, more than 25% below the current sales level and well below estimates for next year.

Alcatel expects its staffing to be cut further, from about 99,000 now to 60,000 at the end of 2003, including the additional staff at Shanghai Bell.

An additional restructuring provision of EUR500m will be booked over the next three quarters, to be funded by disposal of assets.
For second-half 2002 Alcatel expects revenues to be about 10% down on the first half, with a weak Q3 (down 15% sequentially) and a seasonally stronger Q4.

* Alcatel SA president Jean-Pierre Halbron will retire on 31 December 2002, though he will continue to serve on the board.
Halbron served Alcatel initially as chief financial officer before assuming his current position.

Philippe Germond, currently deputy chief executive of Vivendi and chairman of its Cegetel SA mobile-phone unit, will join Alcatel as president and chief operating officer from 1 January 2003 and will be proposed to join the board as a director.

* Despite the decision to accelerate the restructuring, according to a report by telecom market research firm Infonetics Research, in Q2/2002 Alcatel led the USD2.9bn worldwide market for intelligent optical hardware with a 22% share (having increased over six consecutive quarters from 2001 to 2002).

Alcatel ranked first in the following market segments: total intelligent metro optical, metro intelligent SDH/SONET switch, metro WDM transport, long-haul intelligent SDH/SONET switch and long-haul WDM transport.

"In the past six quarters, Alcatel has moved from 9% market share in Q1/2001 to 22% in Q2/2002," said principal analyst and co-founder Michael Howard, "founded on the strength of sales in all world regions of a broad optical product line targeted at most service provider needs for metro and long haul, WDM and SDH/SONET".

"Although the market for optical networking systems continues to erode, Alcatel resists better than the competition," said Christian Reinaudo, president of Alcatel's optics activities. "We believe our success can be directly attributed to our comprehensive product portfolio, strong customer relationships and global presence."

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