Telecommunications equipment vendor Alcatel-Lucent announced Friday (Feb. 8) it would suspend dividend payment for 2007 in response to the "uncertain market outlook" and in a bid to shore up its balance sheet.
Alcatel-Lucent CEO Patricia Russo noted in a statement that worldwide demand for telecommunications equipment market would be "flat to slightly" up in 2007, forcing the company to implement a range of cost-reduction plans.
To further improve its market share, Alcatel-Lucent will intensify 'the ongoing implementation of a more selective pricing approach as well as product cost reduction program," she said. "We also intend to make continued good progress in our fixed costs reduction plan."
The France-based company reported a net loss of 2.58 billion euro, ($3.77 billion) or 1.14 euro per share, for the fourth quarter on a special impairment charge of 2.52 billion euro.
The company said it was compelled to take the impairment charge due to the "continuing decrease in the market value of Alcatel-Lucent's shares during the second half of 2007 and its revised outlook."
Revenue for the fourth quarter rose 18 percent to 5.2 billion euro, up from 4.4 billion euro in the fourth quarter of 2006.
The company reported total 2007 revenue decreased 2 percent to 17.8 billion euro from 18.3 billion euro in 2006 and said it lost 3.52 billion euro, or 1.56 euro per share, for the year just ended.
Alcatel-Lucent, which was formed following the 2006 purchase of Murray Hill, New Jersey-based Lucent Technologies by Alcatel, is still going through the processes of absorbing the former U.S. rival and is further working on reducing its cost structure, according to Russo.
"2007 was a transition year for the company as we executed our integration plans in a difficult market environment," Russo said. "Notwithstanding these challenges, the performance of our wireline, enterprise and services business has been solid."
"On the other hand, the slower-than-expected ramp up of revenues in WCDMA and NGN/IMS, two areas in which we have been investing, has severely impacted profitability," she added.
The company laid off 6,700 people in 2007 with approximately 1,400 of the positions eliminated during the fourth quarter. Alcatel-Lucent closed the year with net cash of 271 million euro versus 124 million euro as at the end of the third quarter.
Russo did not provide specific revenue or profit forecasts for the current quarter although she noted that the company had traditionally experienced a 20 to 25 percent sales decline during the first three months of the year.
"While the long term prospects of our industry remain good, the macroeconomic environment has created uncertainty in our markets in the last few months," said Russo.
"Our initial projections for 2008 indicate that the global telecommunications equipment and related services should be flat to slightly up at constant Euro-dollar rate and slightly down at current rate," she said.