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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

desiEngineer 12/5/2012 | 3:14:35 PM
re: Alcatel-Lucent Job Cull Hits 12,500 russ4br,

The cuts from "less competitive" products was a message board comment, not an ALU press-bite.

Saying that you are focussing on "becoming more competitive" is what they teach you in MBA 101. Making those cuts in the non-competitive sectors is one of the steps to get there.

ALU has been going neck-and-neck with JNPR in the IP/Edge, has a #2 position in ATM, a #1 or #2 position in optical, #1 in DSLAMs, etc. There is focus in those areas because they haven't been holding that position for just one year.

Culling the less competitive sectors is just part of the process.

-desi
flyingsausage 12/5/2012 | 3:14:36 PM
re: Alcatel-Lucent Job Cull Hits 12,500 I think it's a very good summary, expect cuts everywhere !

I believe ALU actually tries to focus on things and become more competitive... however, the numbers are not yet there, maybe fault of the market ? bad management ? legacy ? too big ? bad employees ? let's ask the oracle :)
russ4br 12/5/2012 | 3:14:36 PM
re: Alcatel-Lucent Job Cull Hits 12,500 The product divisions are spread among several countries and regions, with maybe 20 R&D centers wolrdwide. Obviously, the less competitive products will suffer first.

If they are cutting the "less competitive", then expect cuts everywhere.

Why don't we hear ALU focusing on turning things around and becoming "more competitive" instead?

-russ
whyiswhy 12/5/2012 | 3:14:41 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Craig:

SV and VC roots go back to BBS and the start of Fairchild, so the story is a lot older than a decade.

Risk-culture has a lot to do with it: there is admiration for someone willing to drive an old car, live in a studio apartment, and working to midnight if "doing" a start-up. Also no shame in being at your fifth start-up and ten or more years into your career and still waiting for a payoff... just jealousy of those who get lucky do it on their first try.

That's hard to enculture, but once there, hard to beat.

-Why
flyingsausage 12/5/2012 | 3:14:41 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Dear Flam,

Not having worked directly with Mrs Russo, I would not comment on her skills or qualifications. And obviosuly I don't rely on the press or rumours to learn it :)

However, for sure she got the very challenging job of restructuring Alcatel-Lucent, with obvious numerous lay-offs to be done (was the ultimate goal of the merger after all).

I'm not sure these days that the CEO of a huge company like ALU has full decision power and would manage it like an emperor, or like the "Spectre" organization in James Bond 007. Obviously she's not taking decisions alone, and relies on several teams in doing so.

You can be sure that former Alcatel executives will also do the part of their lay-offs jobs, and other regions (Europe, Asia, ...) will suffer as well.

ALU has a matrix structure, with on one hand the product divisions, and on the other hand the regional divisions. The product divisions are spread among several countries and regions, with maybe 20 R&D centers wolrdwide. Obviously, the less competitive products will suffer first. Knowing where a product is developped will allow to guess where lay-offs will occure. Looking at the recent rumours on the Evolium UMTS portfolio and knowing where it's developped, one can guess that even France will face massive lay-offs...
Pete Baldwin 12/5/2012 | 3:14:43 PM
re: Alcatel-Lucent Job Cull Hits 12,500 From yesterday's NY Times, an essay lauding the way Silicon Valley nurtures great ideas:

http://www.nytimes.com/2007/02...
tsat 12/5/2012 | 3:14:44 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Someone much smarter than me once said the key to California's innovation is simple: People here are not afraid of failure.

-tsat
tsat 12/5/2012 | 3:14:44 PM
re: Alcatel-Lucent Job Cull Hits 12,500 > HP? Boeing?

yeah, you might view these companies as old and bloated.

But they are still incredibly successful by any corperate standard.

If that was the 2 worst companies you could come up with, then the West Coast must still be pretty good.

Now, don't go all Tupac on me for saying that.

-tsat
flam 12/5/2012 | 3:14:45 PM
re: Alcatel-Lucent Job Cull Hits 12,500 flyingsausage,

Of course they have offices everywhere. But the culture which permeates the office comes from somewhere and it's top down.

The behavior which is rewarded is the behavior which will take place.

Russo is going to execute layoffs where she's most comfortable and familiar. In the US. Why else do you think Alcatel stuck her in that position? She has no other qualification.



jepovic 12/5/2012 | 3:14:45 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Europe is not one country. The labor laws vary heavily. However, France is a country with labor laws which do come close to the american prejudice about Europe. But of course it's possible to fire people in France, it just takes a bit longer.

Looking at the what the two companies brought into the merger, I'd be surprised if LU wouldn't suffer heavier cuts. AL was a reasonably successful company, after all.

As far as the east coast-west coast debate (Dr Dre, anyone?), I just wanna remind you that Ericsson and Nokia have the coldest-climate HQs of all the major suppliers. They're doing just fine!
njguy 12/5/2012 | 3:14:45 PM
re: Alcatel-Lucent Job Cull Hits 12,500 "So when will ACLU ooops! I mean ALU resort to cutting those pension payouts???"

[NOTE: Hearsay, not fact.]

They may not have to. I'm told that LU hasn't paid into the pension since the AT&T days -- the money that was in there happened to do well in the market. Of course they skimmed any extra cream back into the business, so there's no padding if the investments stop performing.

If those investments stop performing and accounting forces them to do something, they will cut the pension before putting cash into it.

But if they happen to cut enough pension track employees, they won't have to. The LU pension is not linear, if you don't last long enough to hit certain age/years targets you get a pittance. Also, the younger/more-recent employees are not on a traditional pension track. So the pension has to cover a dwindling subset of employees. And if you can lay them off before they hit the big payout years...

Also, they haven't adjusted the pension calculation window in many years, which helps cover the lack of contributions (and could be considered a cut wrt inflation).

Anyway, I'm sure they'll be very careful not to hit the older workers harder. But any US bias in the layoffs is a pension track bias (globally). Win-Win!
flyingsausage 12/5/2012 | 3:14:45 PM
re: Alcatel-Lucent Job Cull Hits 12,500 East Coast vs. West Coast ?

Do you realize guys there is thousand of other regions everywhere else in the world ?
Big companies, especially ones like Alcatel-Lucent have offices and leaders in so many countries, it looks more like a chinese dragon than an East Coast US company or French company...

Looking at past history of both companies, and several lay-offs which happened at both sides in the past 5 years, those will be most likely spread all over the world. I don't think one region/country will suffer the most. As well, firing everyone in US doesn't make much business sense, especially with strong CAPEX spendings from North America operators. I expect lay-offs to be inline with operators spendings and existing ALU major customers. Obviously, countries/regions with the poorest earnings and margins will suffer the most.

Lay-offs are not impossible in europe, maybe more expensive than in other regions due to strict work laws. Just look at the news and the numbers of lay-offs in european companies which hapenned in the last 5 years, including Alcatel-Lucent. Proof is that negotiations between Alcatel-Lucent and workers unions already started in several european countries.

Indeed, lightreading could trying doing some more investigation journalism. So much informations are actually available on Google that they should be able doing more than copy/pasting a press release (my 5 years old sister can do this... :)
bigtaildog 12/5/2012 | 3:14:46 PM
re: Alcatel-Lucent Job Cull Hits 12,500 I guess the major cut will be coming from USA (high cost..), China (too many people?..), but not Europe.

It is said Alcatel-France is preparing for the strike even when they heard there will be a 1000-2000 people cut. Maybe it is a rumor, but it is implying something..
bobcat 12/5/2012 | 3:14:46 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?"
Genius!

"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?"
Priceless...

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

So when will ACLU ooops! I mean ALU resort to cutting those pension payouts???

whyiswhy 12/5/2012 | 3:14:46 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Humm, I had forgotten about Scott's article, but yea.

OK, complex hypothesis revised:

Cold climates and stable soils lead to brick construction, buildings with basements and high levels of Radon.

Warmer climates and unstable soils (and the occasional earthquake) lead to buildings without basements made of concrete from the Permanente mine and trace levels of Cinnabar.

Radon saps East Coast VC energy by inducing pulmonary fibrosis and lowered testosterone levels. Propensity for chain smoking and tight fitting suits among East Coast VCs adds to theis effect.

Mercury vapors make West Coast VC's mad (as hatters) and thus willing to take crazy risks. Propensity for bike riding on mountain roads in tight biking outfits adds to this effect by exercise and altitude induced hypoxia.

Yes, the military contractors on the West Coast are pretty anal, but even in that industry the East Coast military contractors have a definite "edge". Refugees from military contractors are typically shunned by the "hotter" firms in the valley: they just don't "get it".

The East Coast has the mindset that a job is extremely hard to get, and once gotten is best guarded by writing policies and procedures up the ying yang, and playing office politics. The next job is about a hundred miles away in the next state. And the bill for the heating oil is due. Oh my.

The West Coast is California madness which is: "Badge? I dongot no stinkin' badge dude, I dongotta show you no stinkin' badge!" After work or between gigs just head for the beach and live in a tent, maybe drive to Napa and make some wine. No heating oil bills due. Surf's up, see ya'!

So that's why SV California is where risky crazy stuff like start-ups happen and why mad as hatter VC's ride their 15-speeds to work on Sand Hill Road.

That mix just can't happen on the East Coast.

-Why
billy_fold 12/5/2012 | 3:14:47 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Are the bulk of the cuts coming from USA?


You bet your sweet bippy the cuts are coming from the USA. Do you know how hard (impossible) it is to layoff someone in Europe who has worked for the company longer than six months?

-billy
optobozo 12/5/2012 | 3:14:48 PM
re: Alcatel-Lucent Job Cull Hits 12,500 "The East Coast culture seems to be much more political and focussed on appearances."

Are you serious? I've worked for two companies with east and west coast operations. Both times it was the west coast playing politics while the east coast was just trying to get stuff done. Not that blame can't be shared.

Then you have Nortel with the Ottowans coming down in their brilliance telling one of the two true founding companies of routing how to do IP... Now there's politics and appearances for you.

"The Lucent crowd in particular was extremely political." True, but the origins of the company was old-school, government Bellcore. MITRE is similar, and I'm sure the government labs and defense contractors on the west coast are similar.
flam 12/5/2012 | 3:14:48 PM
re: Alcatel-Lucent Job Cull Hits 12,500 I've wondered exactly the same thing. I think the answer lies in the West Coast being "newer" and away from Washington, perhaps?

The East Coast culture seems to be much more political and focussed on appearances. The Lucent crowd in particular was extremely political.

The West Coast has a lower tolerance for these shenanigans.
Roshani 12/5/2012 | 3:14:48 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Why said:

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?
____________________________________________________
Why,

Like Scott said "maybe itGÇÖs the weather" on the east coast that freezes everything including blood/brain and by the time it thaws it is winter again. :-)

http://www.lightreading.com/do...

Cheers,

Roshani
opticalfuneral 12/5/2012 | 3:14:51 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Here's a company that was actually doing well. They survived the meltdown. Not a whole lot of layoffs (even though they could have used a few in job-for-life France HQ). Now they've got the East Germany of the comms world to deal with. 7 years of layoffs and Lucent is still a bag of crap.
whyiswhy 12/5/2012 | 3:14:51 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Boeing counts as East Coast, and seems they are still sticking it to Airbus, in spite of every advantage EU can throw their way on the one hand and still talk about free trade on the other.

HP: Carly and Patty are out, but agree the BOD (except for Perkins who very publicly quit) are still a bunch of hacks. HP is gone baby gone, except in name.

So your thesis is more or less Radon from bricks (East coast) or Mercury vapors from cement (West coast)?

-Why
Duh! 12/5/2012 | 3:14:51 PM
re: Alcatel-Lucent Job Cull Hits 12,500 HP? Boeing?

Sorry, there's lots of bad management to go around, and it's not confined by geography.
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....

-Why
pavlovsdog 12/5/2012 | 3:14:52 PM
re: Alcatel-Lucent Job Cull Hits 12,500 Are the bulk of the cuts coming from USA?

Is the paid evenly spread, or are some products are being affected the most?

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.
Love,
Steve
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.
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...
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.

optodoofus
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).

-russ
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.

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