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Alcatel-Lucent merger not producing hoped for results


Alcatel-Lucent merger not producing hoped for results


The giant telecoms equipment maker Alcatel-Lucent said it has suffered a sharp drop in profits and sales since it was created through the merger last December of France’s Alcatel and US company Lucent. Chief Executive Patricia Russo said the merger had created short-term uncertainty for their customers and that, along with other corporate activity, had affected the business. Russo added, however, that Alcatel-Lucent expects to resume growth this year.

Pro-former figures – that is adding up the totals from both companies from before the merger – shows turnover fell in 2006 to 18.3 billion euros, down from 18.6 billion in 2005. Operating profit was also down from 1.41 billion euros in 2005 to 1.04 billion last year. The combined company had 9,000 fewer employees.

Investors had their doubts over the merger when it happened. As one analyst at ABN Amro said: “Given the chequered past of both Lucent and Alcatel, with both having had their specific problems, it was tough to be optimistic about the merger.”

Alcatel-Lucent also blamed its sales and profit shortfall on intense competition in the industry and a shift in spending by its large North American customers. For example, Sprint is investing 2.3 billion euros in a new wireless broadband Internet network and the orders have gone to Alcatel-Lucent’s rivals. The company’s shares lost 10% of their value.

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