Russo insists earlier growth forecast holds

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Alcatel-Lucent, the Franco-American telecommunications equipment maker, has insisted it can generate revenue growth as it also carries out an ambitious post-merger restructuring.

Patricia Russo, Alcatel-Lucent’s chief executive, expressed confidence the newly merged group can increase sales as it goes about the highly sensitive task of shedding 12,500 jobs.

Some industry analysts have expressed strong doubts that Alcatel-Lucent can successfully combine the two objectives.

In an interview with the Financial Times, Ms Russo admitted morale in Alcatel-Lucent was “mixed”, with some employees feeling “uncertainty” and “anxiety”, because they wanted to know if they had a future at the group.

But she stuck to Alcatel-Lucent’s forecast that its revenue growth for 2007 would be “at least” that of its main customers: telecoms companies that carry voice and data traffic on their networks.

Those companies are forecast by analysts to report revenue growth of about 5 per cent in 2007.

Alcatel-Lucent’s merger, which was completed on December 1, got off to a bad start in January when the group issued a profit warning ahead of its 2006 results.

Alcatel-Lucent has also forecast its revenue for the first quarter of 2007 will show a year-on-year decline.

But Ms Russo said: “We believe we can resume growth as we move through the year.”

Alcatel-Lucent’s revenue in the three months to December 31, which included one month of the merged group’s sales, was €4.4bn ($5.8bn), down 16 per cent year on year. Operating profit was €21m, down 96 per cent.

The deteriorating situation in the first quarter of 2007 implies that Alcatel-Lucent must win market share in the second half of the year if it is to achieve 5 per cent revenue growth for the year.

Ms Russo said the group needed a “stronger second half”, adding: “I have every expectation the folks focused on winning contracts and closing orders and driving the business forward are going to do that, and that we are in fact going to execute the integration plans.”

Alcatel-Lucent in January identified additional post-merger synergies, and raised the value of cost-savings from the €1.4bn originally promised to €1.7bn.

Ms Russo said Alcatel-Lucent would have a relentless focus on cost-cutting.

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