Enterprise sales help Alcatel defy telecoms gloom


15 January 2003 French telecoms equipment supplier Alcatel has said it expects to return to a profit in 2003 following two years of heavy losses, buoyed by healthy sales of IP telephony equipment.

CEO Serge Tchuruk said a stronger “seasonal pattern” than usual meant that sales in the fourth quarter of 2002 will exceed analysts’ consensus expectations. The results, due on 4 February, will show sequential growth in “the high twenties percent” – well above the forecast 20%.

In 2003, Alcatel will focus more on services, which accounted for about 15% of revenues in 2002. “2003 will not be a good year by Alcatel’s standards, but we are making progress. It will not happen this year, but we are able to start thinking again about growth,” he said.

The company, which will have cut its workforce from 119,000 at the end of 2000 to 60,000 by the end of 2003, will also seek to shed debt this year by selling unidentified non-core assets worth at least $1 billion (€950.5m). It ended 2001 with net debt of $2.8 billion (€2.66bn).

Alcatel’s relatively strong performance, albeit by the standards of the crisis-hit telecoms industry, will be seen as a fresh vindication of Tchuruk’s 1995 decision to target enterprises as well as the telecoms service provider market.

Cisco Systems remains the unrivalled leader in enterprise data switching, with an estimated 70% market share.

But Alcatel hopes to overtake Canada’s Nortel Networks as Cisco’s main rival for enterprise clients, Mike Regan, business development manager of Alcatel’s ebusiness networking division, told Infoconomy. Alcatel has between 8% and 15% of that market, he claimed.

Regan said Alcatel is doing better than Nortel in enterprise data networking in Europe, although Nortel’s exclusive partnership with BT will make overhauling Alcatel in the UK particularly challenging.

The proportion of Alcatel’s consolidated revenues from the enterprise division is thought to be about 30% – and rising. About 40% comes from telecoms companies and the rest is made up largely of sales of optical equipment.

The healthy performance of the ebusiness division has been spurred by the launch of Linux-based IP telephony switches for the small and medium-sized business and enterprise markets, which offer “carrier-class reliability at enterprise costs”, he said.

Somewhat surprisingly, Regan said that Alcatel had not yet developed a product for the wireless local area networking (WLAN) market. Significant sums have been invested in WLAN research and development, but Alcatel would wait for the technology to mature before releasing a product, he said.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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