Alcatel-Lucent to cut jobs, reorganize around web 2.0
In its new incarnation, Alcatel-Lucent will focus on three markets -- service providers, enterprises, and selected verticals.
When Ben Verwaayen took over as Alcatel-Lucent SA's new chief executive in September, he said he needed a few months to study the troubled company before deciding what it needed.
Verwaayen delivered his solutions Friday: The company will get a "major strategic transformation" based in large part on taking advantage of open network environments including Web 2.0, Web 3.0 universes, and beyond, according to the company. In its new incarnation, Alcatel-Lucent will focus on three markets -- service providers, enterprises, and selected verticals.
The company also plans to cut 1,000 managerial jobs and 5,000 contract positions. The company didn't mention whether any layoffs were planned among its union-represented employees, who are represented in France in particular by aggressive union leadership.
The company, which has been racked by job cuts and plunging sales and profits in recent quarters, is the result of a shotgun marriage of France's Alcatel SA and Lucent Technologies, which once was the heart of the old AT&T's Western Electric unit. The company's $1.7 billion loss reported in July alarmed investors and Verwaayen, an outsider from BT, was brought in and was able to deliver improved financials in October -- a loss of just $52 million.
"We will work closely with our service provider, enterprise customers, and applications providers to make this strategic transformation happen," said Verwaayen in a statement. "We want to stimulate a sustainable business model for the industry that will fuel innovation and the capital investment required to expand the overall web experience."
The company said the new strategy calls for providing an open Web environment -- "which does not exist today" -- and delivering services and capabilities between networks and Web 2.0 applications. The company said it can deliver on the strategy because of its long-standing relationships with service providers and enterprises. In this regard, Alcatel-Lucent touted its long history in delivering leading edge fixed and mobile broadband networks experience in addition to its system integration capabilities.
The company said it will focus its investments on the four key areas of IP, optical, mobile, and fixed broadband and applications enablement. Alcatel-Lucent said it will consolidate its global R&D centers. The company made no mention of the future of its Bell Labs research facility in New Jersey.
Slated for new "partnering, co-sourcing and participating in the consolidation of the industry to reduce spending are WiMax, CPE, classic core, non-IMS-based fixed next generation network portfolio and some legacy applications," according to the new strategy.
All of this should save a total of euro 750 by the end of the 2009 fourth quarter. Although the company expects the telecommunications equipment and related businesses to be down from 8% and 12% in the full 2009 year, it nevertheless expects the new strategy will produce break-even financials in 2009. For 2010, it expects to reach a gross margin percentage in the mid-thirties and an operating margin in single digits.
"The new management team is committed to rapidly executing this new strategy and leveraging the new streamlined organization," said Verwaayen. "We are focused on delivering results and restoring profitability."
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