Alcatel slips on worries over Lucent

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Alcatel said on Tuesday that second quarter sales rose in line with expectations but shares in the French telecoms equipment group fell after Lucent Technologies, the US group with which it has agreed a merger, reported falling sales and earnings that missed analysts’ forecasts.

Alcatel said that revenues in the second quarter rose 7.5 per cent over the same period last year to €3.38bn. The operating margin, including a 0.3 per cent impact from an exceptional gain from a disposal of fixed assets, fell from about 8.3 per cent to 8 per cent.

The French company confirmed that the Lucent merger was on track, including the level of cost synergies expected to be achieved as the companies combine to create the world’s biggest network infrastructure supplier.

The $13.4bn merger, which was agreed in April and is subject to regulatory and shareholder approval, is expected to deliver €1.4bn ($1.7bn) in pre-tax cost savings within three years, 70 per cent in the first two years after the deal closes. About 55 per cent of the cost savings are to come from a reduction of the combined workforce of about 9,000.

Last month, Nokia and Siemens announced a joint venture to create the world’s third-biggest supplier of network equipment to telecoms companies. The accelerated consolidation among equipment makers has been prompted by the consolidation of the telecoms carriers who are their most important customers, as the carriers’ purchasing power when buying network infrastructure has increased and equipment manufacturers combine to drive down prices through economies of scale.

Lucent said on Monday that third quarter revenues fell from $2.3bn a year ago to $2bn, due mainly to slower sales of wireless network equipment in North America, and to a lesser extent to decreased revenues in China. Diluted earnings per share were expected to fall from 7 cents a year earlier to about 2 cents. Lucent also blamed the consolidation of some of its customers for causing delays in spending, but said that opportunities would arise as the service providers look to the company to help them integrate their large, complex networks.

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