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Executive Business Briefing

Oct. 3, 2001 at 9:40 AM   |   Comments

NEW YORK, Oct. 3 (UPI) -- Here is a look at more of Wednesday's top business stories:


Alcatel cuts fiber optics and undersea staff

DALLAS, Oct. 3 (UPI) -- Telecoms equipment firm Alcatel said it plans to cut approximately one third of its worldwide fiber optics and undersea network staff by summer of next year amid slumping markets.

The cuts of approximately 3,038 workers, which will be made in France, Britain and the United States, come on top of plans announced by the company in July to cut 20,000 permanent and contract staff this year in an effort to make an annual profit.

Alcatel said the move was in response to the current downturn of the undersea network market and to the slowdown of the optical fiber market, following the exceptional growth experienced by both markets during past years.

In the United States, approximately 300 positions will be reduced in the optical fiber site in Claremont, N.C., which employed 1,430 people at end September 2001.

Employees affected by the reduction-in-force will receive comprehensive benefit packages, including severance, job placement assistance and extended medical benefits.

The company said it also will cut its workforce in the French undersea network and optical fiber sites, and positions will be reduced in the undersea network site in Greenwich, U.K.

Alcatel also said a decision has been made to shift to standby mode the undersea cable production site in Port Botany, Australia, by mid 2002.

These measures, combined with the closing of the undersea cable plant in Portland, Ore., announced in May, represent a reduction of 2,151 positions, or 48 percent, in Alcatel's undersea network activity worldwide workforce.

They also correspond to a reduction of 887 positions, or 17 percent, in Alcatel's optical fiber activity worldwide workforce.

In total, 3,038 positions will be reduced from a worldwide workforce of 9,320 in these two activities. Most of these measures will be completed by summer 2002.


McLeodUSA cuts jobs, issues warning

CEDAR RAPIDS, Iowa, Oct. 3 (UPI) -- Telephone and data services provider McLeodUSA Inc., citing the current economic environment, said it plans to cut its workforce by 15 percent, sell some assets and take charges of $2.9 billion to cover write-offs and restructuring costs.

The company also said revenue and earnings for this year and next will fall short of estimates as it scales back its expansion plans to focus on its core 25-state service region.

The company also said it had reached agreement with investment firm Forstmann Little & Co. to delay a $100 million common stock purchase, given the dramatic drop in McLeodUSA's stock, which closed Tuesday at 70 cents a share on the Nasdaq Stock market.

Forstmann Little, however, will continue to make the $100 million available to the company, if needed, with pricing and terms to be negotiated, McLeodUSA said.

For 2001, McLeodUSA said it now expects revenues of about $1.8 billion and earnings before interest, taxes, depreciation and amortization or EBITDA of about $130 million. For 2002, it expects revenues of about $1.8 billion and EBITDA of $250 million to $275 million.

Analysts on Wall Street had been looking for 2001 revenues of $1.91 billion and 2002 revenue of $2.27 billion, according to Thomson Financial/First Call.

McLeodUSA, the nation's largest independent competitive local exchange carrier, said it took the actions to position the company for future success.

"Given the current economic environment, McLeodUSA has redefined its strategy to focus on our core strengths," said Steve Gray, president and CEO.

"Our strategy will emphasize continued expansion in our 25-state footprint where we expect to capitalize on our proven ability to increase our market share," he said.

In support of the company's new strategy, McLeodUSA plans to abandon the development of the national network and place the associated assets for sale. Sell other non-core assets and excess inventory.

These actions are expected to generate $400 million to $450 million in cash in 2002, up from prior estimates of $150 million to $200 million.

The company also plans to reduce employment by approximately 15 percent and execute plans to consolidate 11 facilities into three over the next 12 months, resulting in annual savings of approximately $105 million.

McLeodUSA also plans to scale back capital expenditures from prior plan of $400 million to $350 million in 2002, focused on market growth within the 25-state footprint, primarily augments and new customer requirements.

Chris Davis, chief operating and financial officer, said: "We have spent the past seven weeks evaluating the key operational and financial aspects of the business. The company's rapid growth over the past several years resulted in an overly broad market focus, operating inefficiencies, and inadequate business processes to allow the company to continue to effectively scale. We are taking decisive actions to address these issues."


Average cost of cell phone service rises

LOS ANGELES, Oct. 3 (UPI) -- The average cost of cell phone service increased 0.3 percent in August, following two months of declines totaling 4.7 percent, according to Econ One, an economic research and consulting firm that studies costs in the wireless industry.

The average monthly cost of service in 25 major cities, across four typical usage levels of 30, 150, 300 and 600 minutes was $37.25 in August.

Average costs were higher in 15 of the 25 cities surveyed, while they were lower in 10 cities.

"The apparent leveling off of cost declines is consistent with what we saw last year at this time," said Econ One Senior Economist Charles Mahla.

"Like this year, June and July of 2000 saw strong declines, followed by an average cost increase in August," he said.

"We expected that cost changes would level off, and expect that we will see moderate cost movements until the holiday season," Mahla said.

The report showed the largest increases were found in Pittsburgh, which posted a 3.5 percent rise, St. Louis with a 3.2 percent rise, Washington, D.C. with a 2.7 percent rise and Denver, which rose 2.4 percent.

The greatest declines in costs were in San Diego, where rates declined 3.2 percent, New York and Sacramento where rates fell 3.0 percent, San Francisco with a 2.5 percent decline and Houston, which posted a 2.2 percent decline.

"In those cities where costs rose and fell the most, it appears that plan changes at AT&T Wireless and Verizon drove those changes," Mahla said.

"In those cities where costs rose, plan changes from both AT&T and Verizon resulted in higher costs. In those cities witnessing cost declines, plan changes at Verizon drove those declines."

The report showed Cincinnati had the highest average costs in August -- $39.14 -- even though its average declined 1 percent from July. San Francisco, which frequently tops the list, saw costs drop 2.5 percent in August, dropping it from No. 1 to No. 2 on Econ One's list, with an average of $39.02.

Boston was third, with $38.67, down 1.6 percent from July. Los Angeles and San Diego rounded out the top five in the survey.

Phoenix had the lowest average costs in August -- $36.05 -- even though costs there increased 1.2 percent. Phoenix edged out Houston, Chicago, Minneapolis and Atlanta.


Tiffany & Co issues earnings warning

NEW YORK, Oct. 3 (UPI) -- Tiffany & Co. said its fiscal third quarter net income will fall short of Wall Street forecasts as the attacks on the World Trade Center and Pentagon and a weak economy cut into sales at its U.S. stores.

Tiffany said its expects to post a net income in the range of 12 cents to 15 cents a diluted share in the third quarter, compared with 24 cents a share during the same period last year.

For the fourth quarter, the jeweler forecast earnings of 49 cents to 56 cents a diluted share, compared with 56 cents in 2000.

Analysts on Wall Street had expected the company to post a net income 19 cents a share in the third quarter and 55 cents a share in the fourth quarter, according to Thomson Financial/First Call.

Sales are expected to decline about 10 percent in the third quarter, primarily due to lower sales in U.S. stores.

The company said restrained customer spending due to a continuation of weak and uncertain economic conditions has been intensified by a decline in store traffic since Sept. 11.

Tiffany said comparable U.S. store sales declined 19 percent in the August-September period, which includes a 36 percent decline since Sept. 11.

In that two-month period, U.S. sales declined 30 percent in Tiffany's New York flagship store, which accounted for 12 percent of total company sales in 2000, and 15 percent in comparable branch stores.

In addition to declines in average transaction amounts, store traffic declined in U.S. stores among local residents as well as foreign visitors.

Michael J. Kowalski, president and chief executive officer, said: "In making this announcement, we are attempting to reduce investors' speculation about how our business may perform in the coming months. Weak economic conditions in the U.S. have affected our business since last year's fourth quarter and comparisons to the prior year were made more difficult by robust conditions in the first three quarters of 2000."

Kowalski added: "While comparable U.S. store sales declined 36 percent since Sept. 11, they declined 19 percent in the final week of September with improving store traffic in many regions. We assume that the sales environment will continue to be challenging in the remainder of the third quarter."

The company plans to report its third quarter earnings on Nov. 14.

match Wednesday against Sandra Kleinova of Czechoslovakia.

Topics: Chris Davis
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