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Alcatel-Lucent CEO: We Can Go It Alone

Ray Le Maistre
5/8/2014
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Just over a year ago, the name plate on the Alcatel-Lucent CEO office got a refresh, as Michel Combes became the first French national to take the helm at the Franco-American vendor. (His predecessors, of course, were Dutch and American -- Ben Verwaayen and Pat Russo, respectively.)

Combes moved in on April 1, 2013, and quickly stamped his authority on the company, initiating his Shift Plan (a fancy name for a restructuring process) and doing all he could to make sure the company didn't follow Nortel to the vendor scrap yard. (See Alcatel-Lucent Unveils Shift Plan and Alcatel-Lucent Builds Future Around IP.)

Since then, Alcatel-Lucent (NYSE: ALU)'s share price has tripled, from a shocking $1.32 on the day he took over to $4.02 today. That's still not great -- the company's market capitalization is still only US$11 billion. And when Alcatel-Lucent was formed in late 2006 the stock was trading above $14.00.

The CEO says he had a number of things to address. The company was "trying to do too many things," Combes told Light Reading recently. "We had lost our competitiveness, and we had a broken balance sheet. But we have innovation, which we are reigniting, and a clear vision, and we have fixed the balance sheet. We are starting to reshape." (See Alcatel-Lucent Shifts Up a Gear to End 2013 and AlcaLu Breathes New Life Into Bell Labs.)

That stock might move again tomorrow (May 9) once the company's first-quarter financials have been unveiled.

Whatever those numbers show, Combes will, of course, tell everyone that the company has a bright future as the world becomes ever more connected. The reason he may be right, of course, is that the bedrock of Alcatel-Lucent these days, and the fulcrum of Combes's Shift Plan, is the vendor's IP division, which has long been the company's shining star. And that's just as well, as the future of communications and information networks is IP -- at least for the foreseeable future. (See TiMetra at Heart of AlcaLu's Shift.)

Michel Combes has put in a decent shift as CEO of Alcatel-Lucent.
Michel Combes has put in a decent shift as CEO of Alcatel-Lucent.

The CEO has plenty of convincing to do, though, especially as questions still arise about AlcaLu's future portfolio. Does it have what it takes to make a viable business from mobile broadband access, in the face of intense competition from Ericsson AB (Nasdaq: ERIC) and a rejuvenated Nokia Corp. (NYSE: NOK)? (See Nokia Ushers In New Era, Retires NSN Name and Nokia, Juniper Team To Target Telco Cloud.)

Combes is adamant that radio access is part of the company's future. The CEO reiterated that "ultra-broadband access -- all types of fixed and mobile, from 4G, small cells, 5G," plays a critical role in the roadmap of the company. "We have absolute dedication and commitment to our own mobile broadband. The future is an IP router with a small antenna. 5G will be a small-cell-based architecture and will have to be context-aware -- that's a big challenge."

Combes is also excited about many other emerging technologies and markets. He sees massive potential in the connected car sector -- and he's clearly a fan of the four-wheeled world in general, as he names his favorite movie as Rush, the biopic of 1970s Formula 1 driver James Hunt. And he's bullish about AlcaLu's role in the shift towards virtualization in telecom networks.

"The cloud and NFV -- we are investing a lot in that space. It's the convergence of networks and IT," notes Combes, before adding that the company's SDN unit, Nuage Networks , is already well advanced in what he calls the "first stage of SDN," in the data center. The second stage is the software-defined VPN, and the third step is the virtualization of "the [enterprise] campus… There will be much less hardware on the customer premises."

He adds: "One of the biggest surprises I had when I joined was finding Nuage and CloudBand. That was a very nice surprise." (See How Alcatel-Lucent Set a Telco Cloud Example .)

The upheaval that the cloud and virtualization will bring will result in a "substantial transformation of the way networks will be managed -- they will need a distributed cloud."

And, naturally, Combes is confident his company can deliver what's needed for that. But can it deliver it alone? Will the upheaval force the vendor community into further consolidation? There is constant speculation that Alcatel-Lucent might join forces with the Networks business of Nokia (which was until very recently NSN). (See Eurobites: Alcatel-Lucent's Shares Rise on Nokia Bid Rumor.)

"I don't think consolidation is inevitable. The Shift Plan has reconnected us with cash generation, and we are now in control of our own destiny," Combes says. "That doesn't mean it won't happen, but our focus now is on our own future and building strong partnerships, like the ones we have with Qualcomm and Intel. Those are very powerful." (See Joint Qualcomm & AlcaLu Small Cells Due Mid-Year and Alcatel-Lucent announces global collaboration with Intel to speed industry move to cloud.)

For the time being, Combes is faced with squaring up to his main rivals -- Ericsson, Cisco Systems Inc. (Nasdaq: CSCO), and Huawei, he believes -- to win new business and further improve the company's fortunes. How well he's been doing lately, we'll see when the first-quarter numbers get published.

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

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MikeP688
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MikeP688,
User Rank: Light Sabre
5/13/2014 | 12:44:08 AM
Re: Makes me think of
I hope so for the sake of the thousands who still work for ALU and all who depend on it especially as I saw ALU's latest quest to partner w/Australia's NEXTGEN Team... 
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
5/12/2014 | 4:52:43 PM
Re: Makes me think of
MikeP - I don't think it's at all the case that hte train has left the station and AlcaLu has been left behind. The company's IP focus gives it a solid foundation to rebuild on. 
MikeP688
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MikeP688,
User Rank: Light Sabre
5/10/2014 | 11:38:45 PM
Re: Makes me think of
What is gratifying to see how cheerful and optimistic he is--but it seems to me as you noted that the train has left the station and ALU has been left in the midst.   
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
5/10/2014 | 4:07:02 PM
Makes me think of
Alcatel-Lucent's story makes me think of another struggling company: BlackBerry.

Alcatel-Lucent is succeeding by finding its strongest pillar -- IP networking -- and rebuilding the company on that foundation. 

What strong pillar does BlackBerry have? Does it even have one? Keyboard phones are a plus for many people, but is that enough to rebuild a whole company on?
DOShea
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DOShea,
User Rank: Blogger
5/9/2014 | 10:25:59 PM
Partnerships
Partnerships will help, but if ALU is intent on taking on the likes of Ericsson, the latter company is positioning competitively by both partnering AND acquiring. If ALU isn't going to sell the entire company, can it buy  to augment the areas it hasn't sold off already?
gronchi
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gronchi,
User Rank: Light Beer
5/9/2014 | 7:13:49 AM
Re: About ALU CEO
You're right!

I always get lost between CEO/Chairman/President and so on...
Ray@LR
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Ray@LR,
User Rank: Blogger
5/9/2014 | 5:48:46 AM
Re: About ALU CEO
Tchuruk was chairman of ALcatel-Lucent, while Russo was CEO.
gronchi
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gronchi,
User Rank: Light Beer
5/9/2014 | 5:45:09 AM
About ALU CEO
Just to be precise, Pat Russo was CEO together with Serge Tchuruk, French citizen, so M.Combes is not really the 1st one...

 http://en.wikipedia.org/wiki/Serge_Tchuruk

BR,

G.

 
SarahReedy
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SarahReedy,
User Rank: Blogger
5/8/2014 | 5:15:07 PM
Re: A strong and competitive ALU is good...
I think the partnerships are key too. ALU said they are going to do 4 to 5 of those, so I'll be curious to hear what the next ones focus on and who they are with.
DHagar
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DHagar,
User Rank: Light Sabre
5/8/2014 | 4:38:37 PM
Alcatel-Lucent CEO: We Can Go It Alone
@Heraldsvik, it sounds as it ALU's success is a win-win for everyone. 

I like their recognition of the intersection of networks and IT as being a key to further success.  You are right, if they can now execute and bring to life their development capabilities and deliverables, they will continue to hold a strong position. 

I also think they might have a good strategy with building a multi-partner network, as opposed to just merging with a single player.  This might work.
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