Alcatel reports loss and eyes sale of enterprise and submarine units
02 November 2012 | Kavit Majithia
UPDATE: Alcatel is reportedly considering a sale of its submarine and enterprise units as part of efforts to improve its balance sheet.
Reuters reports that the company has yet to hire banks to work on the deals but the announcement in September that Paul Tufano would take control of the two businesses is a further sign that they are candidates for sale.
An estimate from Goldman Sachs suggests that the two could raise up to €400 million while another source told the newswire that the valuation would be much higher.
Alcatel-Lucent’s financial troubles continued after the company posted a second straight quarterly loss as customers continue to cut capital spend on mobile and fixed networks.
The French vendor may be forced to sell its assets and strengthen its balance sheet as CFO and COO, Paul Tufano, said it was considering options including,“reprofiling debt or an infusion of liquidity, including asset sales”.
It presently faces debt repayments of approximately €2.2 billion to 2015, and the company has already been through €1.03 billion in the first nine months of the year, despite cost cutting. This figure was actually lower last year, standing at €978 million.
Q3 revenue fell 2.8% year-on-year, to €3.6 billion, as lower spending on network equipment in the US, Asia, and a 15% decline in Europe continues to affect the vendor market.
According to Reuters, CEO Ben Verwaayen has been struggling to turn the company around since 2008, but said it was still on track to cut approximately 5,500 jobs as part of cost reduction measures.
Rivals Ericsson and Nokia Siemens Networks have been hit with poor profit margins, as further evidence of customer spending cutbacks.
The larger US carriers, despite upgrading networks to 4G have also declined its spending, and companies like AT&T, Sprint and Verizon are seen as big profit drivers for Alcatel-Lucent. The absence of cheaper Chinese rivals has also kept prices higher in the US.
The news, however, comes a little surprise after Alcatel-Lucent warned in July it would not be making an annual profit target after losses in the Q2.
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