Light Reading
Economic pressures finally lead to major headcount reduction as new cost-cutting plan is announced

Alcatel-Lucent to Cut 5,000 Jobs

Ray Le Maistre
7/26/2012
50%
50%

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).

For more
To see how this story's developed, check out the following:



— Ray Le Maistre, International Managing Editor, Light Reading

(7)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
exon
50%
50%
exon,
User Rank: Light Beer
12/5/2012 | 5:26:18 PM
re: Alcatel-Lucent to Cut 5,000 Jobs


to me it is more than obvious that management team does not have a plan other than to delay as much as possible their ousting. The lack of detail makes this obvious: other than a nice fat (yet not even close to what is really needed that is around 30k people) headcount figure and some fuzzy commentary about exiting contracts, countries and the like, there is no substance.


furthermore the contradictions are visible: they claim 5k reduction when at the same time they consider exiting massive deals and markets. this should be, on itself, much more than 5k....


So good luck to the "performance" program but i think is DOA. Company needs some new brains asap and some more daring steps in the right directions.


 

optiwizard
50%
50%
optiwizard,
User Rank: Light Beer
12/5/2012 | 5:26:16 PM
re: Alcatel-Lucent to Cut 5,000 Jobs


It is more than abvious that a few years after the announcement of the big mergers ALU and NSN that it simply doesn't work. NSN has announced to leave the wireline business a few weeks ago and will be focussing 100% on the mobile market. ALU is still not focussing and trying to do wireless,wireline and enterprise business. There are today just too many companies making the same stuff and all competing on price to each other. Such a business model will kill one or more of the vendors in the near future. The vendors should rethink their strategy and some should leave particular business domains, that is the only way forward. There is no single vendor that is making serious profits for their shareholders, even not Huawei as they just think about growth today and profitability is for later. ALU is now a junk share and could probably be delisted in the near future. It is time for a drastic change in the telecom vendor world. The CEO's that don't understand that mechanism should leave the company as investors will not support them forever without ROI.

DCITDave
50%
50%
DCITDave,
User Rank: Light Beer
12/5/2012 | 5:26:15 PM
re: Alcatel-Lucent to Cut 5,000 Jobs


In the last year, Alcatel-Lucent's market cap has fallen more than 60 percent while the S&P is up nearly 19 percent. I think the story of ALU is not nearly as bad as the charts suggest.


 


<img alt="ALU Market Cap Chart" src="http://media.ycharts.com/charts/33e734465bb7798156d508aee55b4073.png">


ALU Market Cap data by YCharts

DCITDave
50%
50%
DCITDave,
User Rank: Light Beer
12/5/2012 | 5:26:14 PM
re: Alcatel-Lucent to Cut 5,000 Jobs


You raise a good point about debt. It would seem the company needs to file for bankruptcy to resolve that. How long before that happens?


&nbsp;


&nbsp;

timmyd
50%
50%
timmyd,
User Rank: Light Beer
12/5/2012 | 5:26:14 PM
re: Alcatel-Lucent to Cut 5,000 Jobs


Not nearly as bad as the chart suggests? Please buy a calculator and sit down with Alcatel's balance sheeet. The company needs to generate about 120% of its current market capitalisation in cash in the next 3 years to merely repay its debt - never mind pay salaries and invest in the business going forwards. It has generated less than zero net cash in the last 3 years, a fact that could be covered up by asset sales but that process is now done. The fans of Alcatel have argued all the way down that the stock is cheap - that is because they are clearly incapable of financial analysis. Alcatel's current equity is all but worthless and this will be state owned within 2 years

macster
50%
50%
macster,
User Rank: Light Bulb
12/5/2012 | 5:26:12 PM
re: Alcatel-Lucent to Cut 5,000 Jobs


Indeed. Was expecting at least 15k. Among other things.


A good time to make some &euro;&euro;&euro; of their shares though.

52470
50%
50%
52470,
User Rank: Light Beer
12/5/2012 | 5:26:09 PM
re: Alcatel-Lucent to Cut 5,000 Jobs


To paraphrase Bill Parcells, "You are as good as the scoreboard says you are." &nbsp;ALU is not scoring nearly enough. &nbsp;


&nbsp;


The low barrier entry with SIP is commoditizing prices. &nbsp;Good the for the consumer but bad for business built on 60-70% gross margin. &nbsp;

Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Documentaries
Optical Is Hot in 2015

1|23|15   |   01:56   |   (2) comments


Optical comms technology underpins the whole communications sector and there are some really hot trends set for 2015.
LRTV Custom TV
Policy Control in the Fast Lane

1|22|15   |   2:57   |   (0) comments


What's making policy control strategic in 2015 and beyond? Amdocs talks with Heavy Reading's Graham Finnie about the key factors driving change in the data services landscape. Find out what his policy management research reveals about the road ahead for policy control – and sign up for ...
LRTV Documentaries
Highlights From the 2020 Vision Executive Summit

1|21|15   |   4:33   |   (2) comments


In December 2014, Light Reading brought together telecom executives in Reykjavik, Iceland to discuss their vision for high-capacity networks through the end of the decade. The intimate, interactive meeting was set against the backdrop of Iceland's spectacular natural beauty. As one of the event's founding sponsors, Cisco's Doug Webster shared his company's ...
LRTV Huawei Video Resource Center
Huawei Pay-TV Partner Harmonic, Helping Carriers Accelerate 4K Video Deployment with Huawei

1|20|15   |   5:42   |   (1) comment


At IBC, Peter Alexander, Senior Vice President & CMO at Harmonic, speaks about the growing interest in pay-TV service and its branching into multiple devices.
LRTV Huawei Video Resource Center
Sony Marketing Director Olivier Bovis Discusses the Outlook for 4K and Cooperation With Huawei at IBC 2014

1|20|15   |   6:50   |   (0) comments


At IBC, Olivier Bovis, Marketing Director of Sony, speaks about the coming of the 4K era.
LRTV Huawei Video Resource Center
Huawei Pay-TV Partner Envivio, Helping Carriers Accelerate 4K Video Deployment

1|20|15   |   2:57   |   (0) comments


At IBC, Olivier Bovis, Marketing Director of Sony, speaks about the coming of the 4K era.
LRTV Huawei Video Resource Center
Pay-TV's Networked Future

1|20|15   |   6:29   |   (0) comments


At IBC, Jeff Heynen, Principal Analyst at Infonetics, speaks about the future of the pay-TV industry and its transition.
LRTV Huawei Video Resource Center
Jeff Heynen: Distributed Access Will Help MSOs Compete in the Future

1|20|15   |   2:26   |   (0) comments


At IBC, Jeff Heynen, Principal Analyst at Infonetics, speaks about moving to distributed access and the future trend of cable business.
LRTV Interviews
Cisco Talks Transformation

1|20|15   |   13:02   |   (0) comments


In December 2014, Steve Saunders sat down with Cisco VP of Products & Solutions Marketing Doug Webster at Light Reading's 2020 Vision executive summit in Reykjavik, Iceland. They spoke about Cisco's approach to network virtualization as well as how service providers can begin to monetize high-capacity networks through the end of the decade.
LRTV Interviews
Bob Wilson, Arsenal Legend: The Light Reading Interview

1|16|15   |   35:36   |   (3) comments


Arsenal goalkeeping legend Bob Wilson was Light Reading's guest interviewee at the 2020 Vision Executive Summit in December. See what the former soccer star and sports broadcaster had to say when he took to the stage in Iceland.
LRTV Custom TV
What MEF Third Network Initiative Means for SDN & NFV

1|14|15   |   6:13   |   (0) comments


Vitesse Semiconductor CTO Martin Nuss discusses the importance of the MEF Third Network initiative and why it's good news for SDN/NFV industry initiatives.
LRTV Huawei Video Resource Center
Frank Miller: Distributed Solutions are the Best Build for the Future - Part II

1|9|15   |   2:46   |   (0) comments


At SCTE, Frank Miller, Global CTO of MSO at Huawei, speaks about Cable 2.0 and its innovative future.
Upcoming Live Events
February 5, 2015, Washington, DC
February 19, 2015, The Fairmont San Jose, San Jose, CA
March 17, 2015, The Cable Center, Denver, CO
April 14, 2015, The Westin Times Square, New York City, NY
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 9-10, 2015, Chicago, IL
September 9-10, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
November 11-12, 2015, The Westin Peachtree Plaza, Atlanta, GA
December 1, 2015, The Westin Times Square, New York City
December 2-3, 2015, The Westin Times Square, New York City
Infographics
Hot Topics
BlackBerry Wants Net Neutrality Protection -- That's Just Sad
Mitch Wagner, West Coast Bureau Chief, Light Reading, 1/22/2015
FiOS Picks Up Pace Again
Alan Breznick, Cable/Video Practice Leader, 1/22/2015
Verizon Ready for Google MVNO Challenge
Dan Jones, Mobile Editor, 1/22/2015
Indiana Carrier Takes Fiber to the Farm
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 1/22/2015
The New Internet Space Race: Google's Final Frontier?
Dan Jones, Mobile Editor, 1/21/2015
Like Us on Facebook
Twitter Feed
Webinar Archive