Alcatel-Lucent wrote down $4.3 billion against the assets it bought in its 2006 merger, and said the outlook was bleak.
Chief Executive Patrica Russo rejected the view that the charge showed Alcatel
The company's market value has shrunk more than $20 billion since the merger, dropping below the book value of shareholders funds and forcing the French-American group to conduct an impairment test.
"The deal was done at market prices," Russo told a news conference. "I do not think it is a reflection of what was paid or not paid. We are now two years later and market conditions have changed."
She said she was not thinking about another restructuring plan as the group was on course to deliver on revised job cuts.
"This was the largest merger in our industry, and it proved to be more difficult than expected," she said. "I think the bulk of the things we had to sort out have been sorted out."
Russo said the medium- and long-terms prospects for the telecom equipment industry remained good but threats remained, such as the possibility that some telecom operators could share their networks to reduce capital expenditures.
"Already when the deal was announced, we thought they (Alcatel) were paying a high price, so this is just confirmation," said Nomura analyst Richard Windsor in London. "And since then, the market for telecom equipment has substantially unraveled."
Alcatel-Lucent gave disappointing forecasts for 2008 and scrapped its dividend after posting a record net loss of 3.5 billion euros for 2007.
Its cautious tone chimed with U.S. sector peer Cisco, which gave a weak outlook on Wednesday and warned of a rapid slowdown in U.S. and European orders.
Looking ahead, Alcatel-Lucent said it expected to incur an adjusted operating loss in the first quarter due to "seasonal patterns".
Excluding the writedown, Alcatel-Lucent made an annual loss of 443 million euros, beating a 789 million euro average forecast of analysts in Reuters Estimates.
Finance director Hubert de Pesquidoux said Alcatel-Lucent hoped results would improve sequentially each quarter this year.
He said the bulk of operating losses in 2007 came mostly from the group's mobile activities as its fixed line operations were strong.
For 2008, the group forecast revenues in the global telecom equipment and services market to be flat to slightly up at a constant euro/dollar exchange rate and slightly down at the current rate.
Mixed bag
Alcatel-Lucent disappointed investors by forecasting an adjusted operating margin of between 2.5 and 5 percent for 2008 while they expected on average 5.4 percent.
But fourth quarter sales and profits--traditionally its strongest--were better than expected analysts said.
In the three months to December 31, group sales rose 18 percent to 5.23 billion euros and it made an adjusted operating profit of 303 million euros, excluding the exceptional charges, compared with a year-earlier loss of 3 million euros.
"The good news is that Alcatel released strong Q4 numbers this morning well ahead of our expectations," JPMorgan said in a note. "The bad news is that the company has cut the dividend and is guiding for worse numbers than we expected in 2008."
Russo again denied reports Chairman Serge Tchuruk was about to resign.
©2007 CNET Networks, Inc. All rights reserved. CNET , CNET.com , and the CNET logo are registered trademarks of CNET Networks, Inc. Used by permission.
| 02/09/08
