Alcatel reported second quarter losses that saw it dropping into the red for the first time since 1995, continuing the run of bad results from major telecommunications equipment manufacturers.

The French firm recorded a loss of 3.1 billion euros ($2.73 billion) compared with second quarter net income of 344 million ($303 million) in the second quarter of 2000. Sales were up only slightly this quarter at 6.77 billion ($5.96 billion), compared to 6.46 billion ($5.68 billion) over the same period last year.

Alcatel said its was hit by weak ebusiness and handset sales but benefited from increased spending by telcos in mobile and broadband technology. A failed attempt by Alcatel to merge with Lucent (and a swollen inventory) didn't help matters much either.

To restructure its business, Alcatel plans to lay off 14,000 Alcatel employees and 4,000 contract workers this year. An additional 2,000 workers will change employers through outsourcing programs. The firm said that at the end of June it was 60 per cent through implementing this jobs cull, which it hopes will save it 1 billion euros ($880 million) this year.

As part of its restructuring, Alcatel plans to half the number of factories it operates in the UK and outsource much of its manufacturing.

Alcatel's chief executive Serge Tchuruk said he did not expect technology spending in the US to recover this year, and he said that the downturn in the tech economy may spread to Europe, and has already hit the UK.

Along with the earnings announcement cam news that Krish Prabhu, Alcatel's chief operating officer, said he was leaving the company in order to spend "more time with his family" in Dallas. He will continue to sit on Alcatel's board.

Separately, Foundry Networks reported results which show that at least the smaller players in the networking market are keeping their head above water, even if larger players are making losses and shedding staff. Foundry, which makes intelligent networking switches, reported second quarter net income of $8.3 million, down 67 per cent on the $ 23.9 million it recorded in the same period last year.

Foundry's sales fell back from $88.8 million in the second quarter of 2000, to $88.6 million this quarter. ®

External Links

2001 Second Quarter Results
Krish Prabhu resigns as Alcatel's chief operations officer
Foundry's results

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