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 Custom TV
Using Service Quality to Drive WiFi Monetization

10|22|14   |   6:51   |   (0) comments


Live from the SCTE conference: Heavy Reading's Alan Breznick explores the forces shaping the WiFi opportunity in an interview with CableLabs' Justin Colwell and Amdocs' Ken Roulier.
LRTV Custom TV
Distributed Access Architectures – 2

10|21|14   |   8:51:00 AM   |   (0) comments


ARRIS CTO Network Solutions Tom Cloonan discusses why many if not most MSOs will continue with integrated CCAP, while addressing why some are also looking at two futuristic, distributed access architectures: Remote PHY and Remote CCAP.
LRTV Custom TV
Distributed Access Architectures – 1

10|21|14   |   9:01   |   (0) comments


SCTE Sr. Director of Engineering Dean Stoneback discusses the pros and cons of distributed access architecture (DAA) and its various forms, which range from basic Remote PHY to full CMTS functionality in the node.
LRTV Custom TV
The WiFi Road to Riches – 2

10|21|14   |   3:58   |   (0) comments


ARRIS Senior Solution Architect Eli Baruch talks about how MSOs can enable public and community WiFi through 1) outdoor access points, 2) businesses seeking to offer WiFi to customers, and 3) residential WiFi gateway extensions.
LRTV Custom TV
The WiFi Road to Riches – 1

10|21|14   |   10:15   |   (0) comments


SCTE Director of Advanced Technologies Steve Harris discusses WiFi deployments, drivers, challenges and advances, including 802.11ac, carrier-grade WiFi, community WiFi, Hotspot 2.0, Passpoint, WiFi-First and voice-over-WiFi.
LRTV Custom TV
Advantech Accelerates 100G Traffic Handling

10|17|14   |   7:56   |   (0) comments


Paul Stevens from Advantech explains why handling 100GbE needs a whole new platform design approach and how Advantech is addressing the needs of equipment providers and carriers to give them the flexibility and performance they will need for SDN and NFV deployment.
LRTV Huawei Video Resource Center
Holland's Imtech Traffic & Infra Discusses Huawei's ICT Solution and Services

10|16|14   |   4:49   |   (0) comments


Dimitry Theebe is from the business unit at Imtech Traffic & Infra which delivers communications solutions for transportations. His partnershp with Huawei began about a years ago. In this video, Theebe speaks more about this partnership and what he hopes to accomplish with Huawei.
LRTV Huawei Video Resource Center
Huawei's Comprehensive Storage Solutions Vital for SVR

10|16|14   |   6:16   |   (0) comments


SVR Information Technology provides cloud services for academic and special sectors. With Huawei's support, SVR and Yildiz Technical University has established Turkey's largest and most advanced High Performance Computing system. CSO Ismail Cem Aslan talks about what he hopes Huawei's OceanStor storage system will bring for him.
LRTV Huawei Video Resource Center
Mexico's Servitron's Impression of Huawei at CCW 2014

10|16|14   |   6:35   |   (0) comments


Servitron is a network operator in Mexico that has been in the trunking industry for the past 20 years. Its COO, Ing. Ragnar Trillo O., explains at Critical Communications World 2014 that his company has been interested in the long-term evolution of LTE technology and its adoption for TETRA.
LRTV Huawei Video Resource Center
Building a Better Dubai

10|16|14   |   2:06   |   (0) comments


Abdulla Ahmed Al Falasi is the director of commercial affairs, a telecommunications coordinator for the government of Dubai. Their areas of service span across multiple industries, including police, safety, shopping malls and more. In this video, Abdulla talks about his department's work with Huawei.
LRTV Huawei Video Resource Center
Huawei Lights Up Malaysia Partner Maju Nusa

10|16|14   |   1:59   |   (0) comments


Malaysia's Maju Nusa is an enterprise partner to Huawei in networking, route switches and telco equipment. At this year's Critical Communications World in Singapore, CTO Pushpender Singh talks about what Huawei's eLTE solutions mean to his company and for Malaysia.
LRTV Custom TV
Evolving From HFC to FTTH Networks

10|15|14   |   2:19   |   (0) comments


Cisco's Todd McCrum delves into the future of cable's HFC plant, examining how DOCSIS 3.1 and advanced video compression will extend its life and how the IP video transition will usher in GPON and EPON over FTTH.
Upcoming Live Events
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 2, 2014, New York City
December 3, 2014, New York City
December 9-10, 2014, Reykjavik, Iceland
February 10, 2015, Atlanta, GA
June 9-10, 2015, Chicago, IL
Infographics
WhoIsHostingThis.com presents six of the world's most extreme WiFi hotspots, enabling the most epic selfies you can imagine.
Hot Topics
Is Health the Killer App for the IoT?
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 10/22/2014
Drones Hover Over the IoT Sector
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 10/23/2014
Analysts Warn of Major NFV Gaps
Carol Wilson, Editor-at-large, 10/22/2014
Roku Raises $25M, But for What?
Mari Silbey, Independent Technology Editor, 10/23/2014
AT&T: Merger Review Halt Won't Hurt Us
Alan Breznick, Cable/Video Practice Leader, 10/23/2014
Like Us on Facebook
Twitter Feed