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France's Alcatel Issues Strong 4th-Quarter Outlook
Tuesday January 14, 6:15 am ET
By Greg Keller


PARIS -- Alcatel SA Tuesday surprised investors with unexpectedly strong fourth-quarter 2002 revenue and earnings forecasts, a performance some analysts said demonstrated the company's restructuring efforts are paying off.
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The French telecommunications equipment maker said it expects revenue growth in the fourth quarter of 2002 to be "in the high twenties percent" compared with the previous quarter, while its operating result for the same period should be " around breakeven."

Previously Alcatel had forecast a 20% sequential rise in fourth-quarter revenue and said it would only break even before taking into account exceptional items.

Fideuram Wargny analyst Jean-Pierre Geremy said "Alcatel has long been the best in the class among telecom equipment makers and these numbers confirm that."

Alcatel shares, which have gained 37% since Jan. 8, rose sharply on the forecast and were up 19% at 6.60 euros ($6.93) in late morning trading in Paris.

The expected revenue growth is the result of a stronger-than-expected seasonal pattern and sustained sales mainly in broadband equipment and mobile infrastructure, the company said.

"The growth is coming from a healthy increase in broadband equipment, with Wanadoo and T-Online numbers confirming the trend," said Julius Baer strategist Edmund Sching. "With costs under control and with no net debt, this is very good news," he added.

Dexia Securities telecom analyst Antoine de Montille called the trading update "the second sign of a rebound" in Alcatel shares, after the successful launch of a 630 million euro convertible bond issue last month.

De Montille, who has a "buy" rating on the stock, said he sees a possible 20% upside from current levels over the next six months for the shares despite the fact that he still expects revenue to fall in 2003 as telecom operators continue to cut back on spending to reign in debt.

"What they are doing in terms of restructuring is really huge," Mr. De Montille said, and it's this, rather than an upturn in its markets, that will fuel Alcatel's rebound.

Alcatel is in the process of a restructuring plan that aims to cut the workforce to 60,000 at the end of this year from 119,000 at the end of 2000.

Other analysts said they were withholding judgment on the 2003 earnings outlook until the company reports its 2002 financial results later this month.

"The outlook for 2003 is still uncertain but the progress in fourth quarter is encouraging," a London-based analyst said.

-Greg Keller, Dow Jones Newswires; [phone]; [e-mail]



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