Ratings Agency Moody's Downgrades Alcatel-Lucent over Cash Flow

Telecommunications-equipment manufacturer faces 'ongoing problem of weak incoming funds from operations.'

Ratings agency Moody's said Tuesday that it has downgraded Alcatel-Lucent's rating by one notch, from B1 to B2, over concerns the global communications giant is on the verge of cash-flow problems.

"Alcatel-Lucent has been consuming cash from operations since the 2006 merger between Alcatel and Lucent Technologies," Moody's said in a statement.

"Because of continued pressure on its operating performance, visibility of when the company might start to generate cash for debt reduction is limited."

Moody's changed its ratings outlook for Alcatel-Lucent (IW 1000/182) from negative to stable however.

The ratings agency said Alcatel-Lucent has "substantial cash reserves" to cover future spending, but faces an ongoing problem of weak incoming funds from operations and risks running out of cash.

The Paris-based telecommunications equipment maker last month reported an almost 40-fold jump in first-quarter profit thanks to the sale of Alcatel's Genesys unit, but disappointed investors with a weaker-than-expected operating margin.

Copyright Agence France-Presse, 2012

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