Alcatel-Lucent explores financing options with Goldman Sachs

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Alcatel-Lucent (NYSE: ALU) on Friday reportedly began a process to secure funding from Goldman Sachs in a move to bolster its unsteady financial position.

This latest move, reports Bloomberg, is part of a broader strategy taken by Ben Verwaayen, Alcatel-Lucent's CEO, which includes the possible sale of pieces of its patent portfolio in addition to its submarine cable business and enterprise unit.

Verwaayen has burned through cash since taking over the company's helm in 2007.

According to Bloomberg, Alcatel-Lucent has spent about €700 million ($907 million) in cash each year since Alcatel and Lucent Technologies merged. Verwaayen has struggled to turn the company around in a tough economic climate while facing strong competition from Chinese vendors such as ZTE and Huawei.

Goldman Sachs, according to people close to the potential deal, would offer Alcatel-Lucent an undisclosed amount of funding, with the Paris-based vendor offering some of its assets as collateral.

News of the financing work with Goldman Sachs follows another challenging quarter for Alcatel-Lucent.

In Q3 2012, the vendor reported a net loss of €146 million ($189 million), its second straight quarterly net loss, and revenues of €3.6 billion ($4.7 billion), a 2.8 percent drop from the same quarter last year. It also announced a €1.25 billion ($1.62 billion) restructuring program that includes selling off assets and cutting 5,500 jobs.

Some of the assets it has been thinking of selling, according to a Reuters report, include its enterprise communications and submarine cabling business. During the third quarter, the enterprise business declined 13.8 percent year-over-year to €188 million ($243 million). With a 17.5 percent, or €480 million ($622 million) decrease in the optics division, Alcatel-Lucent reported that it was seeing weakness in the submarine cable division despite its recent agreement with Seaborn Networks to build the Seabras-1 system linking Brazil with the United States.

Alcatel-Lucent's news comes amidst a troubling time in the telecom equipment industry as telecom providers are keeping a tight rein on their spending. This is also causing trouble for Tellabs (Nasdaq: TLAB). The Illinois-based vendor reported that it would lay off about 200 employees after announcing that Q3 revenue declined year-over-year from $330 million in Q3 2011 to $264 million.

For more:
- Bloomberg has this article

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