Alcatel-Lucent SA (ALU), France’s biggest phone-equipment supplier, reached a new 23-year low in Paris trading on concern about Chief Executive Officer Ben Verwaayen’s turnaround plan.
The stock fell for a fourth consecutive session, dropping as much as 8.2 percent to 71.5 euro cents and was down 5.4 percent as of 4:56 p.m. in the French capital. The shares are headed for their lowest closing price since at least October, 1989. They are the biggest loser on France’s benchmark CAC 40 Index, which added 0.5 percent.
Alcatel had its recommendation cut to “sell” from “neutral” by Goldman Sachs Group Inc. (GS:US) on Oct. 5, while Credit Suisse Group AG reiterated its “underperform” rating today, saying that weak first-half trends are likely to continue into the third quarter. The company, created in 2006 through the merger of Alcatel SA and Lucent Technologies Inc., fell back to losses in the first half of 2012 after posting its first annual profit in six years in 2011.
“The competition in the industry is extremely rough as rivals in China and other countries produce at lower cost levels,” said Mirko Maier, an analyst at LBBW in Stuttgart, Germany. “The questions is if the restructuring measures, including the job cuts being negotiated with the trade unions and the new government, will be enough to bring the company back to profitability.”
Verwaayen, 60, announced on July 26 reorganization plans, including the elimination of 5,000 additional jobs, to help save 1.25 billion euros ($1.6 billion) by the end of 2013 and return to profit. European carriers are cutting spending as competition from Asian rivals such as Huawei Technologies Co. and ZTE Corp. (763) has weighed on prices.
UBS AG (UBSN) analyst Gareth Jenkins said on Oct. 1 that Alcatel- Lucent will probably sell assets to pay bondholders to the detriment of the company’s shareholders.
The company posted a second-quarter net loss of 254 million euros. The stock has declined 39 percent this year, cutting its market value to 1.7 billion euros.
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