7-26-2012

Alcatel to axe 5,000 jobs

Alcatel-Lucent on Thursday laid a fresh bet on mass job cuts and cost savings to survive stiff competition and weak demand hollowing out the global telecom equipment industry.

The move to axe 5,000 jobs and find 1.25 billion euros ($1.5 billion) by exiting unprofitable markets and contracts is the latest downsizing shift designed to set the company on a solid footing since an ill-fated merger in 2006.

With the telecom equipment market shrinking as major operators cut back spending in a faltering global economy, competition on prices with rivals has intensified

Alcatel is not struggling alone in the sector.

Ericsson posted weaker than expected results for the second quarter, while ZTE issued a profit warning.

Even Huawei Technologies , which has boasted the industry's highest profit margins in recent years, shed 22 percent of operating profit in the first half.

Christian Jimenez, fund manager and president of Diamant Bleu Gestion in Paris, cited the 2009 bankruptcy of Canadian gear maker Nortel Networks as a cautionary tale.

"I'm afraid Alcatel is slipping on the same slope as Nortel, going through a series of doomed restructuring programs"