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AlcaLu Revamps Its Carrier Business

Ray Le Maistre
10/31/2007

Less than a year after it was formed, the Alcatel-Lucent (NYSE: ALU) Carrier Business Group, responsible for more than 70 percent of the vendor's revenues, has been revamped in an effort to simplify operations and better address the needs of network operators.

Until now, the Group, headed by Michel Rahier, has been split into three divisions: Wireline, which was run by Rahier; Wireless, headed by Mary Chan; and Convergence (voice, IMS, IPTV), which had Marc Rouanne at its helm. Each division then had a number of units.

Now the Group of Three is being scrapped and replaced by seven business divisions that the vendor's outgoing CFO, Jean-Pascal Beaufret, described during today's third-quarter earnings conference call as "fully empowered profit centers." Each will have its own leader, who will report directly to Rahier, with the exception of the two mobile divisions (more on that later). (See Russo Shakes Up AlcaLu's Top Team and AlcaLu Cuts 4,000 More Jobs.)

Those seven are:

  • IP, comprising all IP and data products, is led, as before, by our most popular "Mover & Shaker," Basil Alwan. (See AlcaLu Exec Wins Popularity Contest.)

  • Fixed access, which includes all broadband fixed access systems plus video middleware and video networking products, is headed by Luis Martinez Amago. He was previously president of the vendor's Multimedia and Payment Business unit, which was part of the Convergence division.

  • Optics, comprising the full optical transport networking portfolio including wireless and submarine cable transmission, is headed as before by Romano Valussi.

  • Multicore, which includes all legacy voice switches and IP-based voice systems for next-generation fixed and mobile networks, is led by David Geary, who was a member of the Convergence division team and previously with Lucent's Network Solutions Group.

  • Applications, including IMS, IPTV, and business applications, is headed by John Leonard, another Convergence executive who was formerly a VP at Lucent's Mobility Solutions Group and has been involved in IMS developments.

  • CDMA Networks, including all CDMA access and core products, is led by Mike Iandolo, who was already running that business. He will report to Mary Chan, who will then report to Rahier.

  • Mobile Access, comprising all radio access products (excluding CDMA) covering GSM, WCDMA, WiMax, and LTE developments. Philippe Keryer, who was already president of GSM/WiMax, heads this division and also reports to Chan.
Chan's role is as leader of the Wireless Networks function within the Carrier Business Group. That role has been created, according to AlcaLu, to "ensure that all mobility-related activities are aligned to accelerate the development of next-generation wireless networks," and to "credibly present our strategy and commitment to customers regarding their evolution path to 4G."

And Rouanne? AlcaLu says his "future role" within the company will be announced shortly.

No major exits
There are AlcaLu watchers who might be surprised to see the vendor's beleaguered wireless business emerge relatively unscathed. Some analysts believe the company would be better off scaling down its mobile infrastructure activities in the face of fierce competition, especially from Ericsson AB (Nasdaq: ERIC).

But AlcaLu CEO Pat Russo stated on today's conference call that the company is "not exiting any major areas of our portfolio... There has been a lot of discussion, speculation, and commentary" about the company's wireless business. "But if you look at the big picture, what's at stake is the evolution to 4G. The rules of the game are changing -- IP transformation is just beginning in wireless," for instance in the backhaul, an area that ALcaLu is already addressing. (See AlcaLu Targets Wireless Backhaul.)

Russo added that the company's GSM business was growing and is profitable, though the WCDMA business is still in transition. At the start of the year the company had three 3G access lines: Alcatel, Lucent, and the business acquired from Nortel Networks Ltd. . Now that's down to two (Nortel and Lucent), and will be reduced to a single converged product line by the third quarter of 2008, said Russo.

The company is also developing a common platform for its wireless products that will "allow our customers to evolve from any technology to any technology," stated the CEO.

There will be some trimming of product lines in some Carrier Business Group areas, though. Russo said the portfolio of core next-generation network products (VOIP systems) would be "narrowed" because that part of the business had "underperformed this year. This is a revision beyond our original plans."

There will also be some "streamlining" in the applications area, but only so that AlcaLu can focus on areas of real growth potential, such as subscriber data management and messaging. Russo noted that the market for Carrier Applications is currently worth about €8 billion (US$11.6 billion), but that it's due to grow at around 15 percent per year during the next three years, a faster growth rate than other areas of the telecom systems market. In addition, "the margins here are higher than the average across the company," said the CEO.

Russo also said that of the 130 geographic markets in which AlcaLu currently operates, about 15 to 20 generate small revenues and are not profitable, though she didn't name any specific countries. "So we're adopting a different go-to-market strategy" in those countries, though customers will continue to be supported.

— Ray Le Maistre, International News Editor, Light Reading

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OldPOTS
OldPOTS
12/5/2012 | 2:59:47 PM
re: AlcaLu Revamps Its Carrier Business
Stevery,
You missed the point.
She can now blame those 'fully empowered profit centers'

OP
Stevery
Stevery
12/5/2012 | 2:59:47 PM
re: AlcaLu Revamps Its Carrier Business
The Alcatel-Lucent revamp sees its Carrier Business Group reorganized into seven distinct profit centers ...

LOLOLOLOL... can't breath.... LOLOLOL...

Today is a day that will live in hilarity.

First we get "offensive strategy".
Then we get "profit centers" from a company that can't generate an honest profit.

But not merely run-of-the-mill profit centers, we get "fully empowered profit centers". Whoa. Now THAT turns my head.

LOL. I have no idea how she is going to top this one.
gocowboys
gocowboys
12/5/2012 | 2:59:47 PM
re: AlcaLu Revamps Its Carrier Business
This is like shuffling the deck and proclaiming that you will deal 5 aces. This is not a strategy, it is just rearranging the deck chairs.

Simply, Pat needs to go and take much of the Lucent team with her. Several of the Alcatel promotions place individuals well above their level of capability. It seems that the Alcatel political machinery is now taking ground from the Lucent political machinery.

None of this fixes the fundamental issue that the company has become less competitive and needs to completely retool for the current market. The wireless division is scattered, at best. Optics group...TSS, need say more? The IP group seems to be a rare shining star.

Unfortunately, more good people will lose their jobs and Pat will continue to drive this one into the ground. Same song, different day. :-)
Munster
Munster
12/5/2012 | 2:59:46 PM
re: AlcaLu Revamps Its Carrier Business
"Optics group...TSS, need say more?"

Can you elaborate on this? What problems are you referring to?
cftw2001
cftw2001
12/5/2012 | 2:59:46 PM
re: AlcaLu Revamps Its Carrier Business
So has anyone checked out who is hiding in Pat's skirt? Rich McGinn structured the old Lucent into 14 HOT business units many years ago!

cftw2001
mgwrpm
mgwrpm
12/5/2012 | 2:59:45 PM
re: AlcaLu Revamps Its Carrier Business
The news is much less than I had expected. It's mentioned that 'the portfolio of core next-generation network products (VOIP systems) would be "narrowed"', but does anybody have any insight into what this might mean?


-Mark.
gocowboys
gocowboys
12/5/2012 | 2:59:45 PM
re: AlcaLu Revamps Its Carrier Business
The optics group has been developing a product family called the 1850TSS. It won the leading lights award a couple of years back. Here is a link to the corporate web page:

http://www1.alcatel-lucent.com...

From what I have been told, this product family is very late to the market and multiple competitors have better products in this space. But, lots and lots of money was spent on development.
OldPOTS
OldPOTS
12/5/2012 | 2:59:43 PM
re: AlcaLu Revamps Its Carrier Business
Just moving the chairs around?
I just had to reiterate Loosing the Ausi is realy hurting.

OP
bll
bll
12/5/2012 | 2:59:42 PM
re: AlcaLu Revamps Its Carrier Business
xxxxx
einstein
einstein
12/5/2012 | 2:59:38 PM
re: AlcaLu Revamps Its Carrier Business
And what is going to happen to their Enterprise Group in Alcatel? They have the EBG and the Enterprise RSC......

Is this going under Basil Alwan in the IP group?
Looks to me Basil has a promotion.
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