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Alcatel ponders Chinese takeaway

Oriental intervention to save ailing handset business?

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Alcatel is apparently looking to sell its mobile handset division in a bid to stem spiralling losses in the operation. French media reports have linked Chinese manufacturer Nanjing Panda Electronics as a possible purchaser. If these reports prove well founded, a deal with a Chinese company could prove to be a shrewd move in Alcatel's quest to return to profit.

Network infrastructure and services provider Alcatel is thought to be looking at ways to end losses in its mobile phone unit that could include the complete sale of the business to a Chinese company.

"We are reviewing all kinds of solutions," said a spokesperson for the struggling French firm. "These could include a sell-off, a partnership or whatever it takes to end losses."

For the year ending 31 December, Alcatel as a whole reported a net loss of €1.94bn, down from €4.74bn in 2002. Sales fell 21.9 per cent to €12.5bn from €16.0bn in 2002. Indeed, Alcatel has not posted a net profit since the fiscal year 2000.

While the firm has set no hard deadline for making a decision on the future of its underperforming mobile phone unit, the company aims to have a solution by the end of the year at the very latest.

A report in the French newspaper La Tribune claimed that the Paris-based company is poised to sell the unit to Chinese manufacturer Nanjing Panda Electronics although the company itself has refused to comment on the report.

Over the past few years Alcatel has undertaken dramatic steps to ensure its survival by severely cutting its cost base. These comprised a round of job cuts and the disposal of a number of non-core assets. The company divested its battery business last October, and its optical component business in May 2003. It also recently merged its optical fibre and cable business with that of Dutch cable supplier Draka.

A deal with a Chinese company would make sense as it would allow Alcatel access to potentially the biggest and fastest growing mobile phone market in the world, and in return would give a Chinese partner an opening in Europe. Stemming the losses in its handset arm remains a crucial part of the company's restructuring strategy and could play a major part in returning it to profitability.

Source: ComputerWire/Datamonitor

Related research: Datamonitor, "Mobile Consumer Update; data data data" (DMTC0864)

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