& cplSiteName &

Alcatel-Lucent Secures €1.6B Lifeline

Ray Le Maistre
12/14/2012
50%
50%

Alcatel-Lucent (NYSE: ALU) has secured credit facilities to the value of €1.615 billion (US$2.11 billion) that are underwritten by Credit Suisse and Goldman Sachs & Co. , providing the vendor with greater financial security and giving its share price a boost.

The cash pool will help fund the vendor's recently announced restructuring plans, dubbed the Performance Program, which involves cutting about 5,500 jobs and focusing on certain markets and product lines. (See Alcatel-Lucent Unveils Revamp, Alcatel-Lucent Sharpens Its Focus, AlcaLu Job Cuts to Hit 5,500 and Pressure's On in Paris.)

CEO Ben Verwaayen expects the Performance Program to cut annual costs by €1.25 billion ($1.64 billion) by the end of 2013, but, in the short term, implementing that program is going to eat up a lot of cash.

Now that the company has access to more immediate financial reserves, investors appear to feel happier that Verwaayen and his team can rebuild the vendor and become operationally profitable again. Alcatel-Lucent's share price was up by 10 percent to €0.94 on the Paris exchange early Friday morning, though that still only gives the company a market capitalization of €2.17 billion ($2.84 billion).

Naturally, the CEO is painting a positive picture following the credit agreements. "We will take advantage of the flexibility provided by this new financing in order to aggressively look at all options to drive long-term sustainable profitability, enhance our strategic positioning and improve our balance sheet," stated Verwaayen in the company's official statement.

The credit facilities are due to be secured by "among other things, the intellectual property portfolio of Alcatel-Lucent," the company noted. The vendor has identified its patent pool as an asset that can generate cash flow and has been attempting to find a way to cash in on its intellectual property during the past year. (See AlcaLu CEO 'Not Selling the Family Silver'.)

In an effort to maximize its patent value potential, Alcatel-Lucent recently created a dedicated Intellectual Property business unit headed up by experienced lawyer Craig Thompson. (See Euronews: AlcaLu Looks to Profit from Patents.)

Alcatel-Lucent remains confident that it can improve its fortunes during the next few years. In announcing the credit facilities, the vendor noted that it had provided its lenders financial forecasts that include a 2015 gross margin target between 35 percent and 37 percent and an adjusted operating margin between 6 percent and 9 percent, significantly better than the 27.9 percent gross margin and adjusted operating loss the vendor managed in the third quarter of this year. (See Margin Misery for Alcatel-Lucent.)

Some financial analysts are skeptical that AlcaLu can achieve its targets. See this Reuters article for commentary that questions the credibility of the vendor's forecasts.

Why this matters
While this is an important step for the company, it's still only one brick in a very large wall that Verwaayen has to build if AlcaLu is to be one of the communications systems sector's survivors and not, as some in the industry have suggested, become "the next Nortel." (See The Decline & Fall of Nortel Networks.)

The CEO needs to quickly determine which assets are worth retaining, which markets it can afford to exit and whether the company's human resources are compatible with the market AlcaLu will be targeting in the coming years.

He also needs to sort out once and for all how the vendor is going to manage its patent portfolio. During the past year the management has been talking up the value of the vendor's intellectual property but has so far failed to identify the optimum strategy for realizing its potential value. Now Verwaayen, CFO Paul Tufano and new recruit Thompson need to put a workable plan into action (and fast) to help ensure the company's viability and reputation.

AlcaLu needed to do all that anyway, but the new credit lines at least give it access to some of the cash needed to put any plans into action.

If Verwaayen acts quickly and decisively, the company could realize some tangible gains within the next year, if the experience of Nokia Networks is anything to go by. NSN secured fresh funding to bankroll the major restructuring program it announced in late 2011 and now appears to be improving its margins and gaining market share in its target sectors. (See NSN Boasts LTE Market Share, NSN Boasts RAN Market Share Growth, APAC Boosts NSN's Q3, Analysts: NSN Focus Makes Sense and NSN Gets $1.36B & New Leader.)

However, NSN's cuts have been deeper than those proposed by AlcaLu, and it's quite possible Verwaayen will either have to announce further cost reduction actions if he is to get anywhere near the financial targets provide to the lenders. (See NSN Could Lose More Than 17,000 Staff and Alcatel-Lucent: Too Little, Too Late?)

— Ray Le Maistre, International Managing Editor, Light Reading

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
From The Founder
Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Interviews
Heavy Reading: The Web-Scale View

1|18|17   |     |   (0) comments


At Light Reading's 2020 Vision Executive Summit in Rome, Heavy Reading's former chief analyst Patrick Donegan shared insight from the recent web-scale operators report, which featured research on how web-scale operators view the market, the best web-scale companies to ...
LRTV Custom TV
Cisco's Cloud Scale Networking: Automation, Virtualization & Simplification

1|18|17   |     |   (0) comments


Cisco's Sanjeev Mervana outlines the latest innovations in networking technology at CES 2017 in Las Vegas.
LRTV Custom TV
ADVA Talks Innovation & the Future of Networking

1|17|17   |     |   (0) comments


Ray Le Maistre and Christoph Glingener, CTO of ADVA Optical Networking, discuss the current state of the industry, cooperation and collaboration, open innovation and the future of networking.
LRTV Custom TV
Cisco's Infinite Video Platform

1|17|17   |     |   (0) comments


Cisco's Infinite Video Platform allows service providers to deliver broadcast-quality video over IP networks. Infinite video supports many devices, from 4K TVs to tablets to game consoles. Join Cisco's Rajeev Raman for a brief tour and live demo.
LRTV Interviews
Masergy: Ability to Adapt Key for NFV

1|16|17   |   6:40   |   (0) comments


Speaking at Light Reading's 2020 Vision in Rome, Masergy's VP, Global Technology, Ray Watson, said agility is key to providing the mix and match NFV-based services that are driving business for the managed service provider today.
LRTV Interviews
Equinix: The Data Explosion

1|13|17   |   4:16   |   (0) comments


At Light Reading's 2020 Vision in Rome, Eric Schwartz, president of EMEA, Equinix, talked about how Equinix is helping its customers manage the influx of data today, and how it's preparing for a future filled with millions of connected IoT devices.
LRTV Interviews
Heavy Reading: The Changing Data Center Landscape

1|12|17   |   6:05   |   (1) comment


At Light Reading's 2020 Vision event in Rome, Heavy Reading's Senior Analyst Roz Roseboro talks about how virtualization is impacting data center evolution and how that evolution is affecting the relationship between service providers, data center operators and public cloud providers.
LRTV Interviews
Boingo: Prepping for Millions of Devices

1|12|17   |   5:07   |   (1) comment


At Light Reading's 2020 Vision in Rome, Boingo's CTO Derek Peterson discusses how wireless operators will address the needs of low-bandwidth and high-bandwidth apps at the same time, the need for more MHz, the impact of IoT and more.
LRTV Interviews
Comcast Shows Off Gig Gateway at CES

1|11|17   |     |   (1) comment


With its largest presence at CES in years, Comcast took the wraps off its long-awaited gigabit gateway and a new platform for managing the home WiFi network. Light Reading Senior Editor Mari Silbey sat down with EVP Chris Satchell to discuss the latest Comcast advance, and met with VP of Product Strategy and Development Andrea Peiro to walk through a demo of the ...
LRTV Interviews
Colt: End-to-End Key for 2017

1|10|17   |   6:21   |   (0) comments


At Light Reading's 2020 Vision Executive Summit in Rome, Nico Fischbach of Colt said having a multi-carrier, end-to-end service proposition is going to be key for 2017 -- and SD-WAN is instrumental in making it happen.
From the Founder
Cisco's Clemson on Mobile Cloud Video

1|9|17   |     |   (1) comment


Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators. "If you think about where we're going… whether it's a mobile application, or a video ...
LRTV Custom TV
VMware Telco NFV Solutions – Preparing for 5G & IOT

1|9|17   |     |   (0) comments


Shekar Ayyar, EVP & Corporate Strategy/General Manager of Telco for VMware, discusses VMware's Telco NFV solutions role and foundation for the Imminent Arrival of 5G & IOT.
Upcoming Live Events
March 21-22, 2017, The Curtis Hotel, Denver, CO
May 15-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
A Women in Comms Glossary
Sarah Thomas, Director, Women in Comms, 1/18/2017
Is Cable One Beefing Up for Slaughter?
Alan Breznick, Cable/Video Practice Leader, Light Reading, 1/20/2017
Nokia CTO: 2017 Is the Year 5G Gets in the Field
Dan Jones, Mobile Editor, 1/19/2017
TV's Paradox: No HDR Without 4K
Mari Silbey, Senior Editor, Cable/Video, 1/17/2017
Cable Has One Thing Verizon Needs
Mari Silbey, Senior Editor, Cable/Video, 1/17/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading founder and CEO Steve Saunders chats with Sportlogiq CEO Craig Buntin about sports data analysis.
Eyal Waldman, CEO of Mellanox Technologies, speaks to Steve Saunders, CEO of Light Reading, for an exclusive interview about the 100 GB cable challenge, cybersecurity and much more.
Animals with Phones
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.