Alcatel-Lucent is to reduce its global workforce by 10,000 by the end of 2015 as part of the Shift Plan restructuring program unveiled earlier this year by new CEO Michel Combes.
The CEO outlined his plan in June, when he laid out the vendor's new product portfolio roadmap (focused around IP) and said that annual fixed costs would be cut by €1 billion (US$1.36 billion, or 15 percent of the current run rate) by the end of 2015. That operating cost cut was always going to include job reductions, but no details were revealed in June as discussions were still going on with staff representatives. (See Alcatel-Lucent Unveils Shift Plan and Alcatel-Lucent Builds Future Around IP.)
Now Alcatel-Lucent has revealed that those savings will be achieved by:
- Re-allocating R&D investments to next-generation technologies (IP platforms, mobile broadband, optics, and software), which will account for 85 percent of total R&D spending in 2015, compared with 65 percent currently.
- Reducing R&D spending in legacy technologies by 60 percent.
- Reducing headcount.
The vendor had already cut 7,500 jobs during the first half of 2013, taking its global headcount to around 65,000 by the end of June this year. Now, more than 15 percent of that global workforce will be made redundant, with the cuts hitting all geographies, including France. Here's where the axe will fall:
- 4,100 staff in Europe, Middle East and Africa (EMEA) will lose their jobs, including 900 support, sales, and administrative staff in France.
- 3,800 in Asia/Pacific.
- 2,100 in the Americas.
The company also plans to recruit a few hundred staff in France as it focuses its European R&D operations in Villarceaux, south of Paris, which will be "one of the world's largest R&D campuses," according to AlcaLu. Another site in Lannion, France, will focus on mobile broadband (particularly small cells) and subscriber data management (SDM) developments.
Now the pressure will be on Combes to execute the strategy and turn the vendor into a profitable organization while retaining relevancy and market share in key technology sectors: The market will be particularly focused on whether AlcaLu can build on its lightRadio developments and be a major player in small cells and 4G/5G. The company's lack of focus and confusing radio access network (RAN) portfolio has hampered its developments in recent years, leaving Ericsson AB, Huawei Technologies Co. Ltd., and Nokia Solutions and Networks (NSN) to lead the market, though AlcaLu is not without its 4G successes and has struck a notable partnership for small cell developments. (See AlcaLu's Small Cell Menu: Stake and Chips.)
Now AlcaLu faces the same challenge as NSN did in late 2011 -- to clearly communicate and act upon a restructuring strategy that results in a leaner and more viable company. There are signs now that NSN, which shrunk its product portfolio and cut more than 17,000 jobs, has turned a corner and is on the path to corporate recovery, while ALcaLu still has plenty of work to do on that score. (See NSN: The Recovery Looks Real and Charges Slam AlcaLu's Q2.)
The investment community has welcomed the restructuring details. AlcaLu's share price is up by 1.4 percent to €2.93 Tuesday morning on the Paris exchange and is up nearly 188 percent since the start of the year, which was pretty much the company's nadir.
— Ray Le Maistre, Editor-in-Chief, Light Reading