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 Huawei Video Resource Center
Interview With Rick Talbot, Principal Analyst, Current Analysis

10|31|14   |   2:12   |   (0) comments


At the NFV Open Cloud Forum 2014, Rick Talbot shared his positive feedback about the holistic and open approach that Huawei adopts for SDN and NFV. He also found the open sharing at the event valuable as it features different perspectives from Huawei experts, telecom operators, industry analysts as well as security experts.
LRTV Huawei Video Resource Center
Interview With David Snow, Principal Analyst, Current Analysis

10|31|14   |   2:24   |   (0) comments


David Snow talked about his understanding of Huawei and its SoftCOM strategy at the NFV Open Cloud Forum 2014, saying that Huawei's wide approach combining IT and CT expertise, introducing big data and analytics into solutions and contributing to the OpenStack community particularly resonate with him and make the company stand out in the industry.
LRTV Huawei Video Resource Center
Interview With Roz Roseboro, Senior Analyst, Heavy Reading

10|31|14   |   3:13   |   (0) comments


Roz Roseboro commented on Huawei's data center capabilities and NFV solutions at the NFV Open Cloud Forum 2014, saying that in addition to covering all three key domains of compute, storage and networking, the company also emphasizes the importance of management capabilities and professional services, which are essential in making NFV a reality.
LRTV Huawei Video Resource Center
Interview With Michael Howard, Co-founder & Principal Analyst, Infonetics Research

10|31|14   |   5:25   |   (0) comments


Michael Howard talked about SDN, NFV, and OpenStack adoption at Huawei's NFV Open Cloud Forum 2014. Particularly, he pointed out that Virtual Enterprise CPE is the top NFV use case that operators plan to invest in over 2014 and 2015 to deliver new enterprise services through virtualized functions.
LRTV Huawei Video Resource Center
Interview With Jerry Caron, Senior Vice President, Current Analysis

10|31|14   |   3:11   |   (0) comments


At Huawei's NFV Open Cloud Forum 2014, Jerry Caron from Current Analysis said that orchestration and management are key to realizing SDN and NFV for global carriers, and the approach that Huawei is taking, with its FusionSphere Cloud OS at the core, is in the right direction to address the challenges.
LRTV Documentaries
Broadband Battles

10|31|14   |   01:39   |   (0) comments


This year's Broadband World Forum featured a number of show floor battles focused on access gear, components and coffee.
Jonestown
Mobile Backhaul: Going to the Dark Side?

10|30|14   |   2:26   |   (1) comment


Heavy Reading's Patrick Donegan shares his view on a dark trend that bubbled up at Light Reading's annual backhaul conference in NYC.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With CEO of SwitchCom

10|30|14   |   4:13   |   (0) comments


SwitchCom, an IT company based in Angola, recommends a variety of Huawei solutions and hardware to their customers in the energy industry.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With Ethiopia's Ministry of Water Irrigation & Energy

10|30|14   |   4:08   |   (0) comments


Gosaye Mengistie of Ethiopia's Ministry of Water Irrigation & Energy discusses the collaboration with Huawei in that country.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview with Dongfang Electronics Corporation

10|30|14   |   5:46   |   (0) comments


Dongfang Electronics Corporation, headquartered in Chengdu, China, is one of China's largest manufacturers of power generators and contractors of power station projects.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview with Zimbabwe's Customers

10|30|14   |   3:31   |   (0) comments


Representatives of Zimbabwe's Ministry of Power and Development discuss the energy needs of their country as well as new areas of improvement due to enhanced ICT capabilities.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With Colbún Chile

10|30|14   |   4:29   |   (0) comments


In Chile, an aging energy infrastructure was in dire need of a modern update. Claudio Valenzuela of Colbún discusses how Huawei's ICT solutions continue to provide crucial information to improve the grid and how an in-country engineer is a cricial asset.
Upcoming Live Events
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
May 6, 2015, McCormick Convention Center, Chicago, IL
May 30, 2015, The Westin Peachtree, 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
Microsoft's Skype Embraces WebRTC on IE
Sarah Reedy, Senior Editor, 10/27/2014
FTC Slaps AT&T With Throttling Lawsuit
Sarah Reedy, Senior Editor, 10/28/2014
Wheeler Gets Down With OTT
Mari Silbey, Independent Technology Editor, 10/29/2014
China's MVNOs Hit the Wall
Robert Clark, 10/27/2014
Let's Not Kill SDN & NFV With Silos
Francois Locoh-Donou, Senior VP, Global Products Group, Ciena, 10/28/2014
Like Us on Facebook
Twitter Feed