The merger of Alcatel and Lucent was lame-brained from the start. It joined two weak companies in a troubled industry which includes also-rans like Nortel (NT). It is an ugly group of firms which do more poorly with each passing quarter.
Now Alcatel-Lucent (NYSE: ALU) has posted another depressing loss and and will stop paying its dividend. According to The Wall Street Journal "Alcatel-Lucent said it lost €2.58 billion ($3.73 billion)in the fourth quarter, after taking a €2.52 billion charge as it wrote down the value from businesses that sell CDMA and IMS equipment."
ALU did post modest improvement in operating results but its 2008 forecast was less than spectacular. CEO-for-life Pat Russo also kept her job.
The company’s shares are down by about two-thirds over the last year. Nortel has not done much better. News out of the Siemens (SI) telecom equipment JV with Nokia (NOKI) has also be grim as have the results from the Ericsson (ERIC) telecom equipent unit.
The telecom equipment sector still has too much capacity and too many employees. As cruel as it may seem there are tens of thousands of jobs which need to be eliminated by the companies themselves or in the process of more mergers among them.
Otherwise, one or more of the firms in the sector will not make it.
Douglas A. McIntyre
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