AlcaLu Revamps Its Carrier Business
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.
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