French telecommunications equipment maker Alcatel SA will lay off about five per cent of its U.S. workforce, the company said Monday. The news came amid a stream of earnings warnings and staff cuts at high-tech vendors including Ariba Inc., i2 Technologies Inc. and Inktomi Corp.
Blaming an overall economic slowdown and shrinking demand for its communications equipment in the U.S., Paris-based Alcatel said it would cut 1,100 positions from its workforce in the United States. About 800 of those affected are full-time employees from a number of divisions. The remaining job cuts will affect contractors and temporary employees.
Alcatel, one of Europe’s largest telecommunications equipment makers, employs about 130,000 people worldwide, supplying next-generation networks and terrestrial communications equipment from fiber optics to DSL (digital subscriber line).
In the United States, where the company says it generates roughly 23 per cent of its sales, it has been forced to reduce its operating budget as many of its customers have reduced spending on communications equipment.
“We’re not saying specifically which customers,” Alcatel spokesperson Brian Murphy said. Slowing sales have, however, dug into nearly every segment of Alcatel’s business. Aside from layoffs, Alcatel said it is shrinking its travel budget, its administrative costs and looking for ways to cut costs in the supply chain.
“It is important, during these tough economic times in the United States, for us to manage down our cost structure better than ever before,” Mike Quigley, president of Alcatel Americas, said in a statement. “These types of employee-impacting decisions are very difficult to make, but they are essential given the current U.S. business environment.”
While Alcatel is standing by its quarterly and annual earnings estimates for 2001, it did lower its sales outlook for the year when it released its earnings in January, citing weakening demand in the United States.
The company’s mobile phone division also said in early March that it would post a loss on sales of its handsets. Similar troubles have plagued leading handset makers Nokia Corp. and L.M. Ericsson Telephone Co., both of which have said in the last month they expect layoffs in the face of slowing equipment sales.
Outside of the United States, Alcatel has managed to sign a few big-ticket deals this year, including three in Asia. On March 22, the company signed a multi-year deal with China Telecom to sell DSL equipment and services. The same day, it signed a $180 million deal with China’s Jiangsu Mobile to expand its GSM (global system for mobile communications) network and set up a joint research and development initiative in China.
Alcatel announced the layoffs at market close. Shares of its stock [ALA] trading on the New York Stock Exchange gained US$0.24, or 0.83 percent, to end the day at $29.
Also Monday, e-business applications developer BroadVision Inc. said it would lay off 325 people, or 15 percent of its staff, as it revised its fourth-quarter 2000 earnings and warned of a slowdown in the current year [see story –
B2B vendors hit by revenue shortfalls and layoffs
], business-to-business software giant Ariba Inc. said it would cut 700 jobs, or a third of its staff and cancel its planned $2.5 billion merger with Agile Software Corp., and rival supply-chain software maker i2 Technologies said it planned to initiate a cost-cutting initiative, which could include layoffs of about 10 percent of its 6,100-person workforce.
Internet infrastructure developer Inktomi Corp., meanwhile, said it would cut its staff by 25 per cent through a combination of attrition and management action as it warned of a wider-than-expected second-quarter loss. The company said it now expects to lose $0.23 to $0.25 per share for the second quarter on revenue of $36 million to $38 million. Analysts polled by First Call expected the company to bring in revenue nearly twice that and lose only $0.04 cents per share.
Alcatel, in Paris, can be contacted at http://www.alcatel.com/.
