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Optical/IP

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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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?

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.
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
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
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???

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