Alcatel-Lucent reported a net loss for its second quarter and announced that it is planning to reduce its headcount by 5,000 in an effort to further cut costs. The results make it the latest infrastructure vendor to suffer at the hands of the economic downturn, along with Ericsson and Huawei.
The company reported a net loss of EUR254 million for the second quarter on the back of revenue of EUR3.55 billion. The loss was particularly severe when the previous quarter's EUR398 million net profit is taken into account.
Revenue was down 7.1 percent from EUR3.82 billion reported in Q2 2011 but up 10.6 percent from the previous quarter’s EUR3.21 billion.
Revenue for the wireless network business was EUR877 million, up 11.3 percent from the previous quarter’s EUR788 million but down 18.7 percent compared to EUR1.08 billion for the same quarter in 2011. The decline in wireless revenue over the past year was attributed to “moderate or delayed spending of service providers” on 2G and 3G technologies. However, the company’s LTE business more than tripled its revenue during the course of the year.
North America and Europe provided the bulk of the company's total revenue during the period but have declined 8.3 percent and 15.6 percent respectively compared to a year ago. The only region to have increased revenue in the past 12 months is the rest of the world with Central and Latin America recording a seventh consecutive quarter of double digit growth. All geographies were up compared to the previous quarter.
Alcatel-Lucent CEO Ben Verwaayen said the second quarter performance confirms the company’s strong position in “many attractive market segments” such as IP, next-generation opticss and broadband access, but also the effects of the global economic situation. Verwaayen's ommision of 'mobile' from the company's list of strong markets reflects how Alcatel-Lucent is facing serious competition in the wireless sector.
Verwaayen added: “It is clear from the deteriorating macro environment and the competitive pricing environment in certain regions challenging profitability that we must embark on a more aggressive transformation." To that end, the infrastructure vendor has launched "The Performance Program" to achieve a further EUR750 million cost reduction to bring total savings to EUR1.25 billion by the end of 2013. The plan includes the reduction of 5,000 roles in the organisation and the exit or restructuring of unprofitable managed services contracts and markets. “These times demand firm actions,” Verwaayen said.
The company has previously reduced costs through rationalising its product portfolio, co-sourcing, reducing cost structure and managing working capital more effectively. The company is targeting a strong positive net cash position by the end of 2012.