Alcatel Redefines Itself

Alcatel SA (NYSE: ALA; Paris: CGEP:PA) has regrouped its divisions, reducing their number from four to three, in an effort to cut operating expenses and position itself to be a more service-oriented business (see Alcatel Shuffles Its Pack).

Alcatel's calling its new market segments Fixed Communications, Mobile Communications, and Private Communications. But the company's quick to say nothing's being dropped. "We're not giving up any product areas," says spokesman Klaus Wustrack.

Instead, Alcatel's old divisions will be folded into the new structure, as follows:

Table 1: Alcatel Regrouped
Old division Included� Sales 3Q02 (millions) Now part of�
Carrier networking Broadband equipment, DSL gear, GSM infrastructure, applications software, voice switching, services � 1,720.00 Fixed communications and mobile
Optics Optical fiber and components for terrestrial and submarine applications � 704.00 Fixed communications
e-Business Enterprise handsets, voice and data networking equipment � 506.00 Private communications and mobile
Space and components Satellite equipment and non-optical components � 660.00 Private communications
Source: Alcatel financial announcements

Despite company assertions that nothing is being replaced by the new organization, the new groups rise amid ongoing changes and layoffs. Alcatel's declared plans cut its workforce another 28 percent by the end of 2003 -- reducing the census to 60,000 from the 84,000 it had at the end of June 2002. The ongoing process is being undertaken country by country and product line by product line, sources say.

"The implementation of this new organization is also an opportunity to better ensure a greater efficiency in the execution of the undergoing restructuring plan," Alcatel CEO Serge Tchuruk said in a press statement.

Wustrack confirmed reports that Alcatel employees had demonstrated against ongoing layoffs in Paris yesterday but declined to comment.

Alcatel's news recalls similar restructuring efforts at competitors such as Lucent Technologies Inc. (NYSE: LU) and Nortel Networks Corp. (NYSE/Toronto: NT) (see Lucent Clarifies Product Strategy and Nortel Adds Another Enterprise Chief).

Those companies have also hopped the enterprise bandwagon, citing opportunities to sell equipment to large financial organizations, governments and utilities, universities, and other organizations that run their own networks but aren't stymied by the telecom capex crunch facing North American and European incumbent carriers.

Wustrack says Alcatel earns about one-third of its revenues from sales to large organizations that don't fit the description of traditional service provider. The regrouping is also a chance to create new kinds of revenue, for example from vertical applications or value-added services for enterprise customers.

Alcatel and its rivals see a key marketing opportunity in offering "solutions" that encompass products from different divisions in a single sale and add in consulting and integration services, which many firms see as a differentiator for large suppliers.

Of course, the ultimate success of the strategy remains to be proven. In Alcatel's case, as with other suppliers, the ability to mine the enterprise space successfully will depend on the vendor's ability to provide products that fit specific demands. This ability can be questionable in the face of ongoing product and staff "rationalizations." — Mary Jander, Senior Editor, Light Reading
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eltdg 12/5/2012 | 12:54:50 AM
re: Alcatel Redefines Itself mellonHead: "In retrospect he seems like the ideal ALA guy:
20 hour work week, another 20 hours in the
streets of Paris protesting over something or

I agree, except for the 20h work week. The legal work week in France is now 35h (no joke), so it only leaves 15h a week for work, if you keep the holy 20h for protesting...
iso_trouble 12/5/2012 | 12:53:00 AM
re: Alcatel Redefines Itself Alcatel management needs to redefine itself before that of product groups. Their (sales)manangement is infested with people wanting nothing more than to get laid by their staff. What's amazing is not so much their product strategy is failing - it's their sales people aren't the leaders in STDs.
pipesoflight 12/5/2012 | 12:52:20 AM
re: Alcatel Redefines Itself I suspect it comes from the old DSC management. At least that is the way I saw it in Texas.
alcabash 12/4/2012 | 9:09:25 PM
re: Alcatel Redefines Itself ..reorganize, same people, same products, just a power shift.

US employees will suffer even more, optics is folded under Fixed networks and will be cut to pieces.

Alcatel is still the same, legacy voice, DSL and SDH.

DWDM is dead, submarine will re-emerge in 5 years, Alcatel gave up on Sonet, data is only marginal, enterprise and mobilelose money.
jamesbond 12/4/2012 | 9:09:21 PM
re: Alcatel Redefines Itself
Alcatel is still paying price for Mr. Krish Prabhu's mistakes. Just like Intel, they
buy third and fourth tier startups and end
up paying for it later.
BobbyMax 12/4/2012 | 9:09:21 PM
re: Alcatel Redefines Itself Alcatel-USA has made a number of mistakes that almost bankrupted the copmpany. Acatel has paid a tremendous price in acquiring Xylan, Packet Engine and a number of other companies that were not helpful to Alcatel. In addition, Alcatel bought a number of Bay Area Companies of Indian origin that were a complete flop.

If Alcatel acquires Corona Networks, which does not have any custoners, it will be down the path of quickest decent.
single mode figure 12/4/2012 | 9:09:13 PM
re: Alcatel Redefines Itself Early in the days of Rockwell, Krish Prahbu was just another engineer, he rose to the chief and since that watershed Alcatel has shrunk. His involvement with Lasksman Tamil and Yotta Networks was personal, lost some money.

I have worked with many of Alcatel's top talent and they all hated the reign of Prahbu...
God 12/4/2012 | 9:09:11 PM
re: Alcatel Redefines Itself This happens at Alcatel every year. It's amazing that they can keep coming up with new organizational structures

The best way to think of it is as a tree full of birds. When you stand under the tree and clap your hands, all the birds will fly away amid a lot of noise. When you come back an hour later, all the birs are back, but they sit on a different branch
mellonHead 12/4/2012 | 9:09:04 PM
re: Alcatel Redefines Itself Krish was famous for his 42 hour work weeks. I
remember reading, in amazement, in both internal
and external publications where he could not
understand colleagues need for working 50, 60
and perish the thought 70+ hour work weeks.

The legacy he left of failed integration of
startups: Xylan, Packet Engines, Internet Devices
and Assured Access is overwhelming.

In retrospect he seems like the ideal ALA guy:
20 hour work week, another 20 hours in the
streets of Paris protesting over something or

Bongiorno 12/4/2012 | 9:09:04 PM
re: Alcatel Redefines Itself one of my favorite quotes

Quote from Caius Petronius (A.D. 66)

GǣWe trained hard, but it seemed that every time we were beginning to form up into teams we would be re-organised. I was to learn later in life that we tend to meet any new situation by re-organising and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency and demoralisation.Gǥ
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