Telco kit sales get slumpier in 2003 – Alcatel

Alcatel SA has warned that a preliminary evaluation of 2003 market prospects "confirms the likelihood of a further deterioration from 2002 levels." In the chill economic climate, the Paris, France-based telecoms equipment supplier was forced to express its confidence that it could meet its financial obligations.

"The financial situation was seen as continuing to be healthy as a result of strict cash management," it said in a fourth-quarter trading update. Alcatel said that to absorb the deterioration in market conditions, it plans to record additional reserves in the fourth quarter, though it said that this would still leave a significant improvement in operating income compared with the third quarter.

In September, Alcatel announced plans to cut more than a quarter of its workforce as the slump in the telecoms equipment market showed no sign of abating and around 23,000 employees will lose their jobs to get the workforce down to 60,000 by the end of 2003.

It now says that this would enable it to meet its objective of reaching breakeven in operating income in 2003. However, at this stage it can hardly be in a position to see what the full year will hold and further cut-backs cannot be ruled out.

Paradoxically, Alcatel is enjoying a seasonal fourth-quarter revival and forecasts that sales should grow 20% seasonally with the high rate of growth due to sustained sales of broadband equipment.

The only way that Alcatel can overcome a further deterioration is to increase market share, a policy laid out yesterday by Ciena Corp This desperate scrabbling for additional business can only result in one or more of the major players going out of business.

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