Alcatel-Lucent to Cut 5,000 Jobs
Little more than a week after announcing that it wouldn't be able to hit its operating margin targets for the year, Alcatel-Lucent (NYSE: ALU) has announced a new cost-cutting program that will result in 5,000 of the company's 78,000 staff losing their jobs. (See AlcaLu Issues Full-Year Profit Warning.)
The job cuts will impact all regions, CEO Ben Verwaayen said during today's earnings conference call.
News of the cuts came as AlcaLu announced second-quarter revenues of €3.55 billion (US$4.3 billion), down 7.1 percent from a year ago but up 10.6 percent from a weak first quarter. (See Bad Start to 2012 for AlcaLu.)
Second-quarter gross margins of 31.7 percent were down compared with 34.9 percent a year ago, while the vendor's adjusted operating loss (before one-time costs) was €31 million ($37.7 million). It reported a second-quarter net loss of €254 million ($309 million) compared with net profit of €43 million ($52.3 million) a year earlier.
'The Performance Program'
The company's new cost-reduction plan, dubbed The Performance Program, is designed to reduce AlcaLu's annual operating costs by €750 million ($911 million) by the end of 2013. AlcaLu had previously outlined ways to cut costs by €500 million ($608 million) by that timeline, but those measures did not include a major headcount reduction (though the company has been cutting staff during the past year).
Now, though, market and economic pressures have taken their toll. "These times demand firm actions," stated CEO Ben Verwaayen in today's earnings press release.
In addition to cutting jobs, AlcaLu intends to exit or renegotiate unprofitable managed services deals and quit unprofitable geographic markets. No mention was made of winding down or selling off product lines.
As part of the program AlcaLu is also looking to capitalize on its intellectual property and is setting up its patent portfolio as an independent profit center.
The cost-cutting plan wasn't enough to appease investors, as AlcaLu's share price on the Paris exchange fell by 5.4 percent in early trading Thursday morning to €0.83, giving the company a market value of just €1.9 billion ($2.3 billion).
To see how this story's developed, check out the following:
- IP Remains Alcatel-Lucent's Star Performer
- Alcatel-Lucent Could Exit 25% of Services Deals
- Pressure's On in Paris
— Ray Le Maistre, International Managing Editor, Light Reading