AlcaLu Job Cuts to Hit 5,500
9:00 AM -- The headcount reduction at Alcatel-Lucent (NYSE: ALU) will affect 5,500 employees, about 7 percent of the company's 78,000 staff, the vendor told the media Thursday following meetings with unions.
The total is a little higher than the 5,000 indicated in September, when the vendor unveiled its restructuring plans. About half of the total cuts will be in the Europe, Middle East and Africa (EMEA) region.
France is taking a significant hit, with about 1,400 of the 9,000 AlcaLu staff employed in the vendor's home country set to lose their jobs, according to Bloomberg.
The vendor's workforce in India is also expected to take a sizeable hit.
Many in the industry have questioned whether CEO Ben Verwaayen is going far enough with his cost-reduction program. The company has been struggling to keep pace with market changes and is regarded as a likely candidate to become the next major telecom supplier casualty unless it embarks on a more radical restructuring plan.
By comparison, Nokia Siemens Networks is in the process of cutting more than 17,000 jobs and is starting to see the financial benefits of the resulting significant operating cost reductions.
APAC Boosts NSN's Q3
Nokia Siemens Networks received welcome respite from a punishing global market with a boost from Asia/Pacific to its sales and margins during the third quarter.
The vendor reported revenues of €3.5 billion (US$4.6 billion), up 3 percent year-on-year and up 5 percent compared with the second quarter.
Table 1: Nokia Siemens Networks Q3 2012 Key Financials
In millions of euros Q3 2011 Q3 2012 Y/Y change Q2 2012 Q/Q change
Revenues 3,413 3,501 3% 3,343 5%
Reported operating profit -114 182 na -227 na
Adjusted operating profit* 6 323 Significant 27 350%
* Excluding one-time costs and special itemsna = not applicable
The company, which has its financial results reported as part of Nokia Corp. (NYSE: NOK)'s earnings, benefited from favorable changes in currency exchange rates: It noted that at constant currency rates its year-on-year revenues would have been down 3 percent and up by just 1 percent quarter-on-quarter. The increase in reported year-on-year revenues was primarily due to an increase in network infrastructure and services revenues from Asia/Pacific, particularly Japan. Sales in that region (not including China) were up 29 percent from a year ago to nearly €1.27 billion ($1.66 billion).
More importantly, though, NSN is improving its gross and operating margins. Its third-quarter gross margin (after one-time costs) hit 32.2 percent, up from 26.8 percent a year ago, helped, the company noted in its press release, by "unusually favorable product and regional mix towards higher gross margin revenues, particularly in infrastructure equipment [in]... priority markets including Japan and Korea."
NSN's operating margin (again after one-time costs) hit 9.2 percent compared with 0.2 percent last year.
A major contributor to the improved operating margin is NSN's reduced cost base. The vendor's operating expenses dipped by 15 percent year-on-year to €797 million ($1 billion), mainly due to lower staffing costs: The company ended September with 60,600 staff, a headcount reduction of 14,300 compared with the same time a year ago. NSN announced its restructuring program in November 2011.
NSN expects its operating margin in the fourth quarter to be around 8 percent, though it could be up to 4 percentage points higher or lower, the vendor notes.
NSN's news comes only days after ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) announced a drastic third-quarter loss that has sparked a company-wide review.
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