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Dec. 14, 2008

French telecommunications hardware manufacturer Alcatel Lucent announced a major restructuring late Friday, including staff reductions, plant closings and numerous product line consolidations.

The troubled company needs to save € 1 billion per year just to reach the break-even point next year and for 2010.

Alcatel, which merged with U.S. telecom hardware maker Lucent in late 2005, will eliminate 1,000 managerial jobs and 5,000 contractor jobs, company officials in Paris said. It currently employs about 77,000 people globally.

Alcatel’s product focus will remain in wireless applications, broadband, IP and optical segments.

“But Alcatel-Lucent expects the market for telecommunications equipment and related deployment services to be down between 8 percent and 12 percent globally, and at constant exchange rates,” the company said.

Alcatel will also "flatten" its organization, eliminate redundant sales and support positions, reduce discretionary spending and seek less expensive real estate for most of its offices.

In the wireless field, Alcatel plans to increase spending for LTE and W-CDMA, while offering fewer products in CDMA 1x and GSM. Spending also will be reduced for WiMAX technology.

The company will look in establishing more partnerships and will be “participating in the consolidation of the wireless and telecom industry” – most likely selling, although acquiring isn’t ruled out – and will reduce its carrier product group from six to just four divisions.

Alcatel Lucent CEO Ben Verwaayen said “we are focused mainly on delivering real results and restoring profitability for our shareholders. I am confident we have now the strategy and the strengths to succeed.”

Several management changes have also been announced in the past two months.

Entering next year, the division presidents will be: Robert Vrij, Americas; Adolfo Hernandez, Europe, Middle East and Africa; Sean Dolan, Asia-Pacific; Kenneth Frank, solutions and marketing; Janet Davidson, quality and customer care; and Michel Rahier, operations.

Philippe Keryer will be in charge of wireless carrier products; Andy Williams, services; Paul Segre, mobile applications software and Tom Burns, enterprise solutions.

Alcatel’s executive board is also undergoing major changes. Jozef Cornu and Daniel Lebègue resigned Friday.

New directors are Stuart Eizenstat, formerly Deputy Secretary of the U.S. Department of the Treasury; Louis Hughes, CEO of GBS Laboratories and former president of Lockheed Martin, who will lead a board technology committee.

Jean Monty, former chairman and CEO of Bell Canada and Olivier Piou, CEO of Gemalto will also be part of the technology committee.

Other executives in 2009 will be CFO Paul Tufano and Bell Labs Presidnet Jeong Kim. Rajeev Singh-Molares will be senior vice president of strategy and corporate development.

Alcatel Lucent has a growing list of its peers in the telecom market being hit by the global recession.

AT&T recently announced layoffs, Sprint Nextel is rumored to be planning major layoffs as well, while Nortel is considering nothing less than bankruptcy to put an end to its misery.

Wireless industry analyst Gilas Nass generally agreed with Alcatel Lucent’s move, although the company still needs a major turnaround in the industry if it wants to survive, and not just in its corridors...

Nass added “Alcatel's measures announced Friday should save money in the near term and probably help it leverage in-house expertise on several product lines in the long term.”

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Source: Alcatel Lucent.