Alcatel-Lucent Job Cull Hits 12,500

Alcatel-Lucent (NYSE: ALU) fleshed out its additional cost-cutting plans Friday morning by announcing that its post-merger headcount reduction would total 12,500 staff, up more than 3,500 from the initial 8,800 to 9,000 it had signaled last year. (See Alcatel-Lucent Reports Q4.)

When Alcatel and Lucent first announced their merger plan in April 2006, they said that about 10 percent of the total combined workforce of 88,000 would lose their jobs in the three years following the marriage. (See Alcatel, Lucent Seal Deal.)

But trading conditions during the second half of 2006 were tougher than expected, leading to a late January profit warning that was announced only weeks after the merger had closed. The vendor said then that additional cost savings would need to be found, so additional job cuts were anticipated. (See Alcatel-Lucent Suffers Stock Shock .)

The new total of 12,500 job cuts means Alcatel-Lucent is slimming its employee count by just more than 14 percent -- a move that, as long as it isn't revised further, would leave the company with about 75,000 staff by the end of 2009.

"These are difficult but necessary decisions, and we will manage these reductions with care," stated AlcaLu's CEO Pat Russo in a prepared statement. "We are committed to serving our customers' needs, with a competitive cost structure and effective operating model. We will maintain the appropriate workforce level to do that."

News of the additional cull comes just two days after Nortel Networks Ltd. announced it is cutting 2,900 staff during the next two years to reduce its operating costs, and weeks after Motorola Inc. (NYSE: MOT) said it is making 3,500 staff redundant. (See Nortel Slashes Jobs and Motorola Profit Falls 48%.)

The additional job cuts means AlcaLu will reduce its costs by €1.7 billion (US$2.2 billion) during 2007-2009 inclusive, up from the original target of €1.4 billion ($1.82 billion). The company says €600 million ($780 million) of those savings will be made during 2007.

Investors liked the news, as the vendor's stock jumped €0.23, about 2.3 percent, to €10.38 on the Paris Exchange. That's still some way short of the €10.95 price the stock commanded before the recent disappointing trading update for the fourth quarter.

Overall, Alcatel-Lucent's fourth-quarter and full-year financials were in line with the numbers revealed in late January, with one-time charges of €577 million ($749 million) landing the vendor with a €618 million ($803 million) net loss for the quarter. (See Alcatel-Lucent Reports Q4.)

And the near-term outlook isn't encouraging either. In her statement, Russo noted that the "challenging market conditions" and impact of "short-term uncertainty for both our customers and our people" that affected the fourth quarter's results are lingering, and will result in "some revenue decline in the first quarter 2007." She added that revenue growth would resume later in the year, and that revenues for 2007 are expected to grow year on year, in percentage terms, in the mid-single digits.

Five percent growth over 2006 would take this year's revenues to €19.2 billion ($25 billion).

London-based Nomura Securities analyst Richard Windsor notes that a decline in first-quarter revenues is "worse than almost all competitors and it is clear that Alcatel-Lucent is going to underperform the market and its peers for the next quarter at least."

And in a research note issued this morning, Windsor adds that Russo and her team have their work cut out to meet the full-year revenue target, as it would require market share gains during the second half of the year. "We believe this will be difficult as the company will be focused on cutting costs rather than growing share," leading to the risk that revenue expectations could be missed again. "We believe there is scope for more disappointments over the course of 2007," the analyst concludes.

— Ray Le Maistre, International News Editor, Light Reading

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optodoofus 12/5/2012 | 3:14:55 PM
re: Alcatel-Lucent Job Cull Hits 12,500 12,500 won't stand very long. ALALU will end up cutting 20K at least. Then when the dirty work is done, Pat will walk away with a big bag of loot.

russ4br 12/5/2012 | 3:14:55 PM
re: Alcatel-Lucent Job Cull Hits 12,500 What irony, the same day she annouces staff cuts, the last company she so successfully turned around, Kodak announced staff cuts.

What about Pat Russo's seemingly inability to perceive - much less take prepare for and take advantage of - technology and market changes? (digital media in the case of Kodak, and we know the story with Lucent).

ozip 12/5/2012 | 3:14:55 PM
re: Alcatel-Lucent Job Cull Hits 12,500 What irony, the same day she annouces staff cuts, the last company she so successfully turned around, Kodak announced staff cuts. Someone should do a tally of the number of people that have been put out of work at companies under Pats leadership, probably more than the great depression. Dont stand to close, the radiation could kill you.

njguy 12/5/2012 | 3:14:54 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Clearly a reaction to a bad quarter, they respond by cutting more jobs over a three year time frame?

If too many employees is the real problem (not bad management), isn't that admitting that they'll have 12 more bad quarters until the problem is fixed?

Obviously it's not the real problem. It's just the only solution they can figure out. So every bad quarter, cut, cut, cut.

Lucent has a history of cutting only workers, not management. This has resulted in a very management heavy structure. I wonder if ALU will be the same?

spelurker 12/5/2012 | 3:14:54 PM
re: Alcatel-Lucent Job Cull Hits 12,500 I wonder if the fact that she has no qualms about massive layoffs played a role in her selection as CEO? Certainly a merger as large as Alca-Lu is going to result in all kinds of redundancies which encourage layoffs, and that is part of the first CEO's job.

Of course, were I still a shareholder, I'd be concerned as to the downside of layoffs -- the continual cycle of layoffs encourages a "cover your behind" mentality, which results in in-fighting and poor internal communication. This has always been a major problem within LU. Based on Pat's history, I'd be worried that the seemingly continual bleeding at LU becomes common at the combined entity.
eyesright 12/5/2012 | 3:14:54 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Russo is the modern day networking equivalent of Marie Antoinette, she when faced with angry mobs in Paris during a bread shortage uttered the now infamous phrase.

This is a natural cycle in the industry. After the cutting, and the resultant slide in innovation we should see the return of small firms introducing needed technology.

It's unfortunate about the human cost in all this, but this is textbook creative destruction in progress.

lighten up!! 12/5/2012 | 3:14:54 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Under Pat's leadership Lucent lost all credibility. Now she's about to destroy the combined company. You don't have to be a rocket scientist to see the trajectory. How can a board be this irresponsible to allow a failed leader to run a company? Wake up you morons, before it's too late...
Stevery 12/5/2012 | 3:14:53 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Dear Pat,
Thanks for the laugh, you really crack me up.
flam 12/5/2012 | 3:14:53 PM
re: Alcatel-Lucent Job Cull Hits 12,500 The NT UMTS crowd will reign supreme for a while. Then the Lucifers (Lucent Lifers) will move in to help "integrate" them into the LU (sorry ALU) "culture."

Then they will eat them from inside out.
whyiswhy 12/5/2012 | 3:14:52 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Just curious: what is it about the East coast that tolerates (and I mean long term) completely crap management at former industrial icons like Corning, Kodak, Lucent, etc? Old blood, old school, old boy networks? Radon out gassing from brick buildings?

OK, we have some of it here in SV, but CEO-fools seem to be short lived out here. Supply and demand?

I've been puzzzled by this for some time....

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