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Optical/IP

Lucatel: French Staff Not Safe

Lucent Technologies Inc. (NYSE: LU) says that planned staff cuts following the merger with Alcatel (NYSE: ALA; Paris: CGEP:PA) won't be characterized by any geographic discrimination. (See Alcatel/Lucent: No Job Cut Clarity Yet and Alcatel, Lucent Seal Deal.)

In a document filed with the Securities and Exchange Commission (SEC) , Lucent says it has received questions from its staff about the planned merger with Alcatel (temporarily named "Lucatel"). The document shows that Lucent employees are worried that the proposed 8,800 job cuts (10 percent of the combined staff) will affect them more than Alcatel's employees in France, a country known for its heavily regulated employment laws.

Lucent CEO Pat Russo, and the future CEO of Lucatel, responded to these questions during an all-employee broadcast made on April 4, as did the firm's COO, Frank D'Amelio, at a "Town Meeting" on April 3.

The document also provides a continental breakdown of where the combined staff -- Alcatel's 58,000 and Lucent's 30,200 employees -- are based: 38,200 (43 percent of the combined total) are in Europe, 26,900 (30 percent) are in North America, and 23,100 (26 percent) are in the rest of the world.

Not surprisingly, the majority of the European staff (33,500) are Alcatel employees, while most of the North Americans (17,900) are from Lucent.

One question in particular highlights a key concern of Lucent staff: "How can you take a fair and balanced approach when you consider the fact that it's almost impossible to lay anyone off in France? What if the majority of the 8,800 job cuts have to come from Lucent?"

In her response, Russo refutes the idea that French staff have less to worry about. "To the question about it being impossible to cut jobs in France, I would say that's absolutely flat-out not correct. If you look at the reductions that Alcatel has taken as a company and the number of jobs they've reduced in France, I would venture to say it's probably equal to what we've done as a company," the CEO stated during the staff broadcast.

"The processes are a bit more rigorous, and it may take a little bit longer. But nobody should conclude that we will make our decisions based on do-ability," she added. "We're going to make the decisions based on what's in the long-term best interests of the company, because there really isn't a country in this world that you can't reduce jobs… So concluding that all the reductions will come from Lucent is flat-out wrong. And concluding that there can't be any reductions in countries where it's tougher, is also flat-out wrong."

D'Amelio addressed the same flat-out concern during his presentation, where he faced the following question: "As we've seen in the last few weeks, it's very difficult to lay off people in France. So this 10 percent that you're talking about, is that going to be equally distributed between the companies or is 90 percent of it going to come from Lucent?"

The COO replied: "At this point in time, I can't tell you I know exactly how the spread's going to take place… This combined company is a global company. My guess is there'll be synergies that are spread, but in terms of what the mix will be, what the percentage will be, I can't say. But let me just give you some financial facts," stated D'Amelio, before tripping up over the extent of Alcatel's presence, about 9,000 staff, in North America. "Alcatel has roughly 10,000 employees today in North America -- 6,000 employees are in the U.S. They have 7,000 employees in China, just to give you a feel for the diversity, the broad geographic diversity of that company."

He later added: "In terms of how you get synergies, you don't want to be taking a lot of synergies in low-cost areas. You want to bias the higher-cost areas in terms of maximizing value, so clearly that'll be a consideration as we work our way through the process. But really, what will drive it is the business decisions, and based on those business decisions we'll see the output that'll generate the financial results."

D'Amelio also said that a new name for the merged company wasn't a certainty. When asked whether it was safe to assume that the combined company would take neither the Alcatel nor Lucent names, he said "No." He added: "The reason I said 'no' is Lucent and Alcatel both have lots of brand value today, depending on the marketplace that you're in... One of the things that we're looking at, is there a way to not necessarily do an 'or' but to do an 'and' and try to maximize the value that both brands bring. We're looking at all of our alternatives."

No, we're not sure what that means either.

— Ray Le Maistre, Flat-Out And/Or Editor, Light Reading

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OldPOTS 12/5/2012 | 3:56:53 AM
re: Lucatel: French Staff Not Safe Quiq looks better in 8 months as she flounders with the French connection problem. Mr T is watching.

Notice some layoffs may be later, much later.

OP
desiEngineer 12/5/2012 | 3:56:52 AM
re: Lucatel: French Staff Not Safe Yo chip_mate,

You think he's going to tell you what's going to happen? You think because he temporizes, that he doesn't KNOW what's going to happen? Or do you think he's gotta know name by name or percentage wise geographically, just because someone asks, what the spread is?

BTW, it's clear that "spread" is not a euphemism for layoff - it's how the distribution of the layoffs is going to look like across various parts of Alcatel and Lucent.

Terrified? Yeah, of regulatory boards and such. They aren't going to shoot their mouths off when the deal hasn't been approved yet.

Geez! Wait patiently for episode 2. Make intelligent guesses like the others. But don't expect them to come out now and tell you how's it's going to roll out.

We're all waiting with bated breath, but have a care - there's many people who don't want this one screwed up, and there's many competitors waiting for it to get screwed up. I wouldn't blame them for moving slowly and cautiously.

Perhaps you are of the opinion that he should just blurt out everything he knows?

-desi
chip_mate 12/5/2012 | 3:56:52 AM
re: Lucatel: French Staff Not Safe Is "spread" the new Euro term for layoffs?
"The COO replied: "At this point in time, I can't tell you I know exactly how the spread's going to take placeGǪ This combined company is a global company. My guess is there'll be synergies that are spread, but in terms of what the mix will be, what the percentage will be, I can't say."

Or is his mind at the Country Club right now, dreaming of that lovely spread for his toasted bagel crisp?

How in the World can a COO not have a clue as to how the SPREAD will work out? Is he a COO or a guy in the mailroom listening to gossip?
Isn't someone, anyone in charge at Lucent supposed to KNOW what's going on?
I believe they do know, but are terrified to reveal the ugly truth.
Holmdel/Murray Hill are "dead campuses walkin".
Maverick1 12/5/2012 | 3:56:51 AM
re: Lucatel: French Staff Not Safe Pat has to say what she is saying and it is also correct that they don't know yet because France hasn't told them yet. This is a Alcatel takeover of Lucent, period. The requisite short term window dressing of Pat and others and the ludicrous "merger of equals" comments notwithstanding. Yes; goodbye to Holmdel; lots of Murray Hill; Lots of Naperville; and Westford, MA (that favorite short-time way station for so many buy-outs such as Ascend, Springtide, Nexabit, Yurie). No one buying much of the product from those locations anymore. Lucent piece has to be cut back drastically; much isn't profitable.
ATMRules 12/5/2012 | 3:56:50 AM
re: Lucatel: French Staff Not Safe Very Nicely put:

"Westford, MA (that favorite short-time way station for so many buy-outs such as Ascend, Springtide, Nexabit, Yurie). No one buying much of the product from those locations anymore. Lucent piece has to be cut back drastically; much isn't profitable"

As a former Ascend/Lucent employee I can't see how Westford will escape from the crosshairs on this combined company: In the last 3 years if you were transferred from any Lucent Massachusetts location to 1 Robbins Road the writing was on the wall, Westford is more like "out processing center"

Good Luck to all!
Maverick1 12/5/2012 | 3:56:49 AM
re: Lucatel: French Staff Not Safe There are only a couple things Alcatel wants from Lucent, primarily mobility, the rest has to be history; Remember the reason for this acquisition. This acquisition and its deep cuts are necessary to survive in a shrinking customer pool environment looking for next-gen products against very tough competition. Lucent messed up IP at many levels multiple times, messed up next gen optical and data switching multiple times, and messed up much of rest of optical multiple times, plus dozens more lines. Lucent legacy businesses are dropping rapidly and they are staffed, and musical chairs managed fat, by those who know how to hang on with their buddies, not how to innovate. Their service business is not the right model. Alcatel on the other hand, is a business. Has made such things as the Timetra acquisition pay off very well and have followed it up with more innovation, targeted appropriately by customer and geography. They are a true multi-national company. They are number 1 in optical WW and know how to run lean, and trim acquisitions appropriately, even large ones like Lucent, where they have been making inappropriate product too little and too late.
^Eagle^ 12/5/2012 | 3:56:49 AM
re: Lucatel: French Staff Not Safe folks, instead of only looking at geography and which employee is in France vs USA (although I agree those are important and will influence layoffs), lets look at job layoffs by function.

Instead of freaking out about being laid off if I am in Murry Hill, or Holmdel, etc... I would be looking at my job function!

for instance: out of the combined company how many of the total employees are in sales and marketing? I would speculate that these folks are at high risk. You don't need redundant account management covering "mom & pop" phone companies in Iowa or Bangladesh (no offense intended for residents of those areas) or other areas. Even in large high profile accounts.. do you really need redundant account management at Verizon, ATT (SBC), Qwest, etc.?

If I were in accounting, admin, HR, sales, marketing, etc... I would be very worried.

If I were in dead or dying product lines.. I would be very worried.

But for most of engineering, operations, manufacturing, customer support.. I would chill out. The world demand is ramping up and all the big suppliers are struggling to ramp ability to deliver as well.

Note: LU opto has been growing faster in terms of % growth than any of the other Tier 1 OEM's. LU opto has been growing at about 17%. Alcatel at 7%. Nortel opto has also been growing. Huawei opto is growing.

There are similar stories around various wireless technologies..

Even though LU has some management issues.. so does ALA! maybe there are some good synergies that we are overlooking. Even though ALA is #1 in world in terms of overall size.. many of their home grown products are not gaining market share. The ones gaining share are often companies ALA acquired (DSC for instance for access and SS7...or Trimetra for edge routing). LU has failed at many acquisitions, but some of the homegrown stuff is actually quite good and taking share. Maybe ALA needs the innovation that LU has (I hear the laughing from readers of the chat boards now). I would argue that LU has always had innovation. They have fallen down sometimes on knowing what to do with it and how to exploit it.

ALA may need some LU technologies to continue to remain #1. With Huawei growing much faster than rest of market and poised to take over number 2 in share.. well.. maybe ALA needed to bulk up to defend it's position.

all my ramblings for now.. it will be intersting to see the responses to this post.

sailboat
Lite Rock 12/5/2012 | 3:56:48 AM
re: Lucatel: French Staff Not Safe Alcatel on the other hand, is a business. Has made such things as the Timetra acquisition pay off very well and have followed it up with more innovation, targeted appropriately by customer and geography. They are a true multi-national company. They are number 1 in optical WW and know how to run lean, and trim acquisitions appropriately, even large ones like Lucent, where they have been making inappropriate product too little and too late.

Que the French National Anthem. Do they have cheerleaders at French sporting events?

Sailboat hit the nail on the head with how this thing is going to go down. The only possible discrepancy will be if the American corporate types have enough influence then they will start dumping folks on the service side (CS, TAC, Accounting, Order Mgmnt., etc...) before Sales and Marketing.

The hand that rocks the cradle...

Cheers
zoinks! 12/5/2012 | 3:56:43 AM
re: Lucatel: French Staff Not Safe I disagree with sailboat about the impact to engineering.

Old and money losing (or even breakeven) lines will be cut and the people let lose. New emerging stuff will be done in cost effective locations.

There is not enough work to go around. And the work that needs to be done is price sensitive and needs to be done as cheaply as possible for this combined behemoth to complete.

Moneymaking products will be forced to grow in lower cost countries, instead of in high cost countries, in order to maintain or grow margins.

Both LU and Alcatel will be pushing much overseas in my opinion. Lucent likes India, Alcatel likes central Europe and Russia for lower cost development (especially given the proximity). And let's not forget that Alcatel Shanghai Bell is over 6,000 people and growing.

French engineering will be tough to cut, given the social policies. American and Canadian engineering teams are easy prey.

But then again, I am a pessimist.
^Eagle^ 12/5/2012 | 3:56:43 AM
re: Lucatel: French Staff Not Safe Lol, this one is easy. If you have 10,000-20,000 sales, marketing and sales support staff, and another 10-20k in overlapping admin: HR, accounting, SCM, corporate legal, and senior management,... it is laughably easy to find 8000 to lay off.

WITHOUT TOUCHING key core competencies from fundamental R&D to manufacturing to operations.

The cuts to me seem easy and relatively shallow.

The issues that concern me are different than the layoffs.

How are they going to merge operations and product lines. That is where my personal interest is. How do all the rest of us effectively keep doing business with them through the transition?

sailboat.

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