Telecom hardware maker Alcatel Lucent announced a major restructuring today, including staff reductions, facility closings and product line consolidations.
The company needs to save Euro 1 billion per year to reach the break-even point in 2009 and 2010, so it will eliminate 1,000 managerial jobs and 5,000 contractor jobs, officials in Paris said. It currently employs about 77,000.
Alcatel also will flatten its organization, eliminate redundant sales and support positions, reduce discretionary spending and seek less expensive real estate.
Alcatel’s product focus will remain in the applications, broadband, IP and optical segments, however, “Alcatel-Lucent expects the market for telecommunications equipment and related deployment services to be down between 8% and 12% at constant exchange rate,” the company said.
In the wireless field, Alcatel plans to increase spending for LTE and W-CDMA, while offering fewer products in CDMA 1x and GSM. Spending also will be reduced for WiMAX.
The company will look to establish more partnerships and will be “participating in the consolidation of the industry” – most likely selling, although acquiring isn’t ruled out – and will reduce its carrier product group from six to four divisions.
“We are focused on delivering results and restoring profitability. I am confident we have now the strategy and the strengths to succeed,” CEO Ben Verwaayen said in a statement today.
Several management changes have also been announced in the past two months. Entering 2009, the division presidents are: Robert Vrij, Americas; Adolfo Hernandez, Europe, Middle East and Africa; Sean Dolan, Asia-Pacific; Kenneth Frank, solutions and marketing; Janet Davidson, quality and customer care; and Michel Rahier, operations. Also, Philippe Keryer is in charge of carrier products; Andy Williams, services; Paul Segre, applications software (and CEO of Genesys); and Tom Burns, enterprise.
Other executives in 2009 will be CFO Paul Tufano and Bell Labs Presidnet Jeong Kim. Rajeev Singh-Molares will be senior vice president of strategy and corporate development.
Alcatel’s board is also undergoing changes. Jozef Cornu and Daniel Lebègue resigned today. New directors are Stuart Eizenstat, formerly Deputy Secretary of the U.S. Department of the Treasury; Louis Hughes, CEO of GBS Laboratories and former president of Lockheed Martin, who will lead a board technology committee; Jean Monty, former chairman and CEO of BCE; and Olivier Piou, CEO of Gemalto.
Alcatel has a growing list of its peers in the telecom market being hit by the recession. AT&T recently announced layoffs, Sprint is rumored to be planning layoffs as well, while Nortel is considering bankruptcy.
The 451 Group analyst Gilas Nass generally agreed with Alcatel’s move, although the company needs a turnaround in the industry, not just in its own corridors. “Today's announcement from [Alcatel] seems like a good start for a turnaround: focusing on what you think you are strong at and keeping it in front, less focus on actual R&D in areas you feel you aren't offering extremely great products,” he said. “These measures announced today should save money in the near term and probably help it leverage in-house expertise on several product lines in the long term.”
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