Alcatel-Lucent Shares Surge as CEO Ben Verwaayen Steps down

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By Lianna Brinded | February 7, 2013 7:36 PM EST

Ben Verwaayen, outgoing CEO at Alcatel Lucent (Photo: Reuters)

Alcatel-Lucent shares surged in early trading in Paris after its chief executive Ben Verwaayen announced he will be leaving the company following the telecom equipment maker's huge 2012 net loss.

Shares rocketed 8.1 percent to €1.40 in early trading even as the group reported lower sales in Europe and China and an impairment charge.

Alcatel-Lucent posted a full-year net loss of €1.4bn euros ($1.9bn /£1.2bn) and confirmed it would not be paying shareholders a dividend for last year. Sales also fell by 5.7 percent to €14.5bn last year, compared with 2011, when Alcatel-Lucent managed its first annual profit since its 2006 merger.

After posting its results in a statement on the company website, Alcatel-Lucent revealed that Verwaayen would step down after nearly five years at the firm and failing to deliver on his pledge to return the group to "normal" with a steady cash flow and profit. He will remain in place until a successor is found, the company said. 

Since the 2006 merger, Alcatel-Lucent has been struggling to regain steady profitability. Since Verwaayen became CEO in 2008, Alcatel shares have plunged more than 70 percent. 

Although the group has axed headcount substantially through several rounds of layoffs and trimmed its product portfolio, it has had trouble competing with rivals such as Ericsson and Nokia-Siemens Networks because of its proportionally higher cost base.

"Our fourth quarter reflects the early progress of The Performance Program announced last July. We announced clear choices on where we would operate, how we would operate and where we would differentiate," Verwaayen said in the statement

"We have seen progress on all these choices, and close 2012 ahead on our cost reduction plans. We have addressed half of the previously margin-diluting Managed Services contracts, and show continued and strong growth in IP and Next Generation Wireless. We can see a clear statement of customer confidence through growth in both our order book and backlog," he adds.

The telecoms group has struggled to regain market share in the face of weakness in Europe and Asia.

Alcatel-Lucent global sales fell by 1.3 percent to €4.1bn in the fourth quarter last year, the group said, despite a better-than-expected 13.7 percent increase in its US market.

One of the largest hits it took to its balance sheet was the non-cash charge of €1.4bn "related to the depreciation of goodwill and fixed assets, and the corresponding impact on deferred tax."

Goodwill is an accounting convention that represents the amount paid for an acquisition over and above its market value.

Paul Tufano, chief financial officer at Alcatel-Lucent, said the charges stemmed largely from "lower value attributed to the group's wireless and optics businesses."

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