Alcatel to Trim 20,000 Jobs

French telecommunications giant Alcatel said Friday that
it would cut some 20,000 workers from its staff over the next 15 months.

This constitutes approximately one quarter of its workforce, according to
the Associated Press. The concern would have about 60,000 employees
by the end of 2003. The company would not say what areas of its interests
would be affected, but it seems logical that the cuts will be global.

While staff trimming at the large firm is no surprise, the breadth is
certainly new news. The company originally wanted to pare its staff to
70,000 from 83,000. Now it will trim to 60,000. These new cuts will mean
that Alcatel will have shed nearly half of its work force in three years,
according to AP.

“This doesn’t come as a surprise at all,” said Yankee Group analyst Mark Bieberich. “I think you’ll see competitors scale back to about 60,000 employees by 2003. Some, such as Lucent, will have less.”

As for a timetable for improvement in the telco equipment market, Bieberich told that 2003 looks like it will be a break-even year in the industry. The analyst said he expects conditions to improve in mid-2004, noting that the slew of major equipment purchases like those made in 1999 won’t see light of day for another 18 months or so. Bieberich said Cisco and Alcatel enjoy solid relationships with their customers and are well positioned in their core businesses.

Like others of its ilk suffering from the dearth in phone company spending,
Alcatel wants to glide into the black next year; it anticipates revenue to
plummet by about 36 percent this year to $15.9 billion, down from last year’s
sales of $24.9 billion.

To be sure, Alcatel’s current woes are comparable to those of North American competitors Nortel Networks and Lucent Technologies . Nortel announced August 27 that it would trim another 7,000
jobs and lowered its third-quarter revenue forecast. Nortel said it planned
to cut its work force to 35,000 people. The company had 95,500 employees in
December 2000.

Meanwhile, Lucent flirted with the New York Stock Exchange delisting mark
just three days ago. The company’s shares sank to 97 cents a share, a new
low since its 1996 spinoff from AT&T.

Cisco Systems’ lead in the flagging market is intact, as
it held on to first place with 14.6 percent of the $27.3 billion telco
equipment market in the quarter, according to Synergy Research Group.

Total revenue from communications equipment fell 27 percent from $37.3
billion a year earlier. Compared with the first quarter of 2002, Ericsson’s
market share rose to 11.3 percent from 9.4 percent; Alcatel’s share climbed
to 10.2 percent from 10.1 percent; Nortel’s increased to 9.8 percent from
9.7 percent; and Lucent Technologies Inc.’s slipped to 7.8 percent from 9.5

“Although we are starting to measure a stable recovery in enterprise IT
spending, recovery in service provider capital expenditures still remains
unseen,” says Jeremy Duke founder & principal analyst of SRG. “This
continues to be detrimental to traditional telecom manufacturers.”

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