AlcaLu Makes Product Cuts

Alcatel-Lucent (NYSE: ALU) has started trimming its extensive product portfolio to give customers a better idea of what technology they can expect from the giant vendor in the future. The company's mobile infrastructure and optical equipment portfolios are the first to have experienced some product cuts.

As CEO Pat Russo explained during today's earnings conference call, it's a move the company's customers needed to hear. A lack of information about which products were likely to survive the Alcatel/Lucent merger led to some carrier customer indecision towards the end of 2006, and that, in turn, contributed to a poor quarter's numbers for the newly formed equipment giant.

"We had to address the portfolio and rationalization -- we had to provide clarity for our people and our customers. For the most part, we have finalized the product portfolio," based around the strategic areas the company is focused on, which Russo said are IMS, 3G, value-added services, next-generation optical and data, and broadband access in fixed and mobile. So, quite broad, really.

Yet Russo was still coy about releasing any details about products that are being discontinued. Only when asked to confirm a particular decision in the wireless business was any detail forthcoming.

Here's what the company has made public. In its fourth-quarter and full-year results presentation today, the company recorded restructuring costs of €577 million (US$749 million). The main components of this were "write-offs of intangible assets related to 3G mobile & optical/data" and "product termination related to 3G mobile & optical/data." General merger-related costs and headcount reductions accounted for less than €60 million ($78 million).

"We did a lot of work in advance [of the merger] in terms of making decisions about the portfolio and the roadmap -- how to blend and merge the feature functionality that's important to the customers, and you need to plan that to go over a couple of years. For the most part that is done, but we couldn't communicate that until we were combined," said Russo.

The process of telling the carriers happens in two phases, added the CEO. "First, we need to talk about the general portfolio, about what customers can expect. That's followed by the more technical briefings that the tech folks want to have to understand specifics around roadmaps, timeframes, and feature functionality. We started this as soon as we could, but we have a lot of customers and it takes a long time."

As a result, the first quarter of this year will also be hurt by some further carrier indecision about purchasing, and revenues are expected to be lower compared with a year ago. And that's another reason the company is making further cost reductions. (See Alcatel-Lucent Job Cull Hits 12,500.)

Russo also claimed that, among the product rationalization decisions, "there were no surprises," and that customer reaction to the decisions made has been "good." She added: "A lot has been done, but there's obviously a lot more to do."

So what has been done?

Find out on Page 2...

1 of 2
Next Page
Page 1 / 3   >   >>
^Eagle^ 12/5/2012 | 3:14:47 PM
re: AlcaLu Makes Product Cuts Ray,

how about some digging and some real investigative journalism regards the product line cuts. I would especially like more information on the cuts in optical. After all this is the "light" reading site that was originally constructed to cover optical news.

I appreciate the article as far as it went. But how about some real digging for a change. Even if ALU does not want to let us all know what exactly is being discontinued, LR should be able to find out. After all the customer base and supplier base is HUGE. Some calls to carrier contacts, insider contacts etc. and a report back to us would be very helpful.

some good old fashioned journalism instead of re writing press reports.

Thanks in advance.

hrdhtr 12/5/2012 | 3:14:47 PM
re: AlcaLu Makes Product Cuts The only surviving(?) product line will be the old Yurie/PSAX stuff. The rest of the products and the bulk of the people who support them are all done.
zoinks! 12/5/2012 | 3:14:46 PM
re: AlcaLu Makes Product Cuts Is that speculation or are you reporting an official announcement???
corwin0 12/5/2012 | 3:14:45 PM
re: AlcaLu Makes Product Cuts To answser the question - take a look at how much NEW revenue LU generated off of Cascade/Ascend in recent years... Now, in a product space where the other internal competition is the 7470 and 7670, which would you pick? The numbers, should, speak for themselves.
materialgirl 12/5/2012 | 3:14:42 PM
re: AlcaLu Makes Product Cuts CSCO is about to eat ALU's breakfast, lunch and dinner. The move to IP networks is taking a surprising turn, in that video dominates, not data. ALU is too data-driven and piece-parts oriented to win. The next build-out is starting soon, and will be done by CSCO. ALU is just too far behind.
tmc1 12/5/2012 | 3:14:40 PM
re: AlcaLu Makes Product Cuts materialgirl,

"get off the (crack)pipe!"

Alcatel has been doing video since the beginning of IPTV... before MS they had another video solution (OMP) which still has over 1M users. They have ALL the major wins in the space TODAY, a dominant solution and partnership, and lots of experience with video. Now with Lucent they have taken over one of the larger existing video deployments with Telefonica.

If anything, the nascent video revolution has provided a paradigm shift away from Cisco... or does ~ 1B in IP router revenue (and growing) for Alcatel IPD in 3 years not count? Most of that at cisco's expense. They have also FORCED cisco to spend billions in acquistions to keep up.

Furthermore, Cisco has no end to end solution and will not because they do not want to get into the low margin access equipment space. Alcatel is doing to Cisco in the SP space what Cisco does to everyone else in the enterprise space. Turnabout is fair play and Service Providers want partners and not companies that just want to cherry pick the high margin products and drop the rest in their lap.
desiEngineer 12/5/2012 | 3:14:39 PM
re: AlcaLu Makes Product Cuts mg,

1. IPTV is a surprising turn? Since the SBC deal for 1.x billion, led by ALU, ALU has been on top of the architecture for triple play.

2. What piece parts are you talking about? Short of buying a set-top player (investment in 2wire, ties with Thomson, notwithstanding), what part of the end-to-end picture has ALU not got? The end software? That's covered with a strong partnership with MSFT.

I've a couple of questions for you - regarding the "next build out":

- How exclusive is SA going to be? Only selling set-tops in csco environments? They will never get the profits if they do that.
- How's csco doing in the access (PON, GPON, FTTx, VDSL, etc.)
- How is the access aggregation? 6500s and 7600s? I don't think so. Long in the tooth.
- How about the edge router? GSR? baby CRS? I don't think so. Wrong features.
- How about the core? Ok, there's the buggy CRS, but it is a cheap core router.
- What about subscriber management? CSCO doesn't really have a good solution here.

So, we've got the set-top box with MSFT software and the core. Don't talk about piece parts. CSCO has never had a system strategy and until goreyo comes out, they don't even have enough parts to say piece parts.

metrokid 12/5/2012 | 3:14:38 PM
re: AlcaLu Makes Product Cuts please do not mention Telefonica and Alcatel. Telefonica developed Imagenio platform based in Riverstone, yes that company that ALA kill thanks Lucent, and now that I am pretty sure that ALA will kill all the Riverstone products, are you really sure that they will be able to manage this deployment up and running at the same level? let me say, I will not bet for them. They could have many pieces of the puzzle but still do not know how to play with it.


kaka 12/5/2012 | 3:14:38 PM
re: AlcaLu Makes Product Cuts If csco doesn't have a system strategy, then who does?
giga 12/5/2012 | 3:14:35 PM
re: AlcaLu Makes Product Cuts where is the cascade product and where are the people left or even in yurie. u can count on finger tips. what about umts redundancy

Page 1 / 3   >   >>
Sign In