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Alcatel to Cut 4,000 More Jobs, Sees Flat Sales

Alcatel-Lucent said it would cut another 4,000 jobs by 2009 and trimmed full-year revenue growth expectations yet again after seeing fresh signs of a slowdown particularly in North America.

The revised outlook and extra cost-cutting measures, which were largely expected, came as the French-American telecoms equipment group published a forecast-beating third-quarter adjusted operating profit on Wednesday.

Investors cheered the performance and the restructuring, lifting the shares more than 4 percent.

The stock, which has lost more than 40 percent this year, pared earlier gains to be up 1.1 percent at 6.70 euros, outperforming a flat DJ Stoxx technology index.

Alcatel-Lucent which has issued three profit warnings since merging in December 2006, said full-year sales would be flat at constant exchange rates -- at the low end of its forecast range of "flat to slightly up" set last month.

As recently as June, it still expected sales growth of some 5 percent.

"We are seeing fairly recently some further signs of softness with respect to spending, again predominantly in North America," Chief Executive Patricia Russo said in a conference call with reporters.

The group is the leading provider of ADSL fixed-line equipment for broadband Internet, telephony and TV broadcasting but comes only third worldwide for mobile infrastructure behind Ericsson and Nokia Siemens Network.

"What investors were interested in were the benefits from the cost-cutting programme and the first fruits were found in the third-quarter results," said Alexander Peterc, analyst at BNP Paribas.

More Savings

The new staff cuts will bring the total to 16,500 and affect countries such as France where unions staged demonstrations on Wednesday in front of Alcatel-Lucent's plush central Paris headquarters.

Alcatel-Lucent said it would make extra savings of 400 million euros ($576.2 million) in gross margin and comparable operating expenses by the end of 2009, bringing the total to 2.1 billion euros.

It confirmed it would make 600 million in savings in 2007 but would not give specific savings forecasts for 2008.

Finance Director Jean-Pascal Beaufret, who announced on Wednesday he would leave in a few weeks, estimated the extra savings would cost about 500 million euros.

Beaufret would be replaced by Hubert de Pesquidoux, who currently heads the enterprise unit of the group.

"We view the departure of Jean-Pascal Beaufret as a significant negative as we think he is the best CFO in the industry," said Richard Windsor, analyst at Nomura in London.

"Also, the timing of the restructuring is longer than expected," he added.

Alcatel-Lucent posted an adjusted operating profit of 70 million euros ($100.8 million) for the three months to Sept. 30 against an operating profit of 430 million euros last year and expectations of a 2.1-million euro operating loss.

The operating profit figure leaves out restructuring costs, impairment of assets, disposals and post-retirement benefit plan changes and excludes the cost of Alcatel's acquisition of Lucent recognized during the period.

Unadjusted, the group made an operating loss of 379 million euros in the third quarter and a net loss of 318 million euros.

"The conditions in the market are such that the volumes we are seeing are not what had been expected," Patricia Russo said.

The group said it was now targeting gross margins in "the high 30's" in percentage terms and adjusted operating margins of 10 percent or more in the post-integration phase beginning 2010.

Alcatel-Lucent generated revenues of 4.35 billion euros in the third quarter, up 2.3 percent from the second quarter and slightly below expectations of 4.38 billion euros based on a Reuters poll.

It said it would not exit the high-speed mobile market because it considered it strategic even if analysts suggested it should consider selling the business.