Alcatel-Lucent Moves Ahead with Restructuring

By Tim Gray

TMCnet Web Editor

 

Alcatel-Lucent (News - Alert) says it will restructure managerial segments of its global workforce as part of a strategic plan aimed at cutting costs by up to nearly one billion dollars by the fourth quarter of 2009.

 

The Franco-American firm, formed by the 2006 merger of Alcatel and Lucent, said it will cut 1,000 managerial posts from its global workforce as part of the plan.

 

As the world’s economy continues along its bumpy path, companies across all industries are streamlining operations.

 

As TMCnet previously reported, Alcatel-Lucent CEO Ben Verwaayen first unveiled the company’s strategic plan for 2009 in December, which included consolidating financial obligations and setting the company on a more stable path through a combination of extending relationships with service providers, enterprise and application partners.

 

More details of the restructuring came to light today including the elimination of 450 managerial positions in North America and 450 in Europe. Alcatel-Lucent managers made the announcement Wednesday in France at a works council meeting, according to a Reuters (News - Alert) report.

 

Amidst the ongoing restructuring, Alcatel-Lucent is moving forward with key initiatives. TMCnet reported this week that the company had unveiled enhancements to its Carrier Ethernet line that includes a customer premises switch for business VPNs.

 

The 7210 Service Access Switch is designed to be owned and managed by the service provider as a component of a managed Ethernet VPN service offering. The two versions are: 7210 SAS (News - Alert)-E and the 7210 SAS-M.

 

The announcement is significant as the Carrier Ethernet space is a key market segment in the company’s plans moving forward. In fact, says analyst firm IDC (News - Alert), transition to Carrier Ethernet from private line was valued at approximately $40 billion worldwide in 2008.

 

Alcatel-Lucent's move further into this space is expected to be a key driver in its growth in the coming years. IDC says the Carrier Ethernet Services market is set to grow 22 percent per year through 2012.

 

The idea for operators to deploy the Carrier Ethernet portfolio is to offer enterprises higher bandwidth services with faster time-to-market and reduced IT costs.

 

In terms of market share, Alcatel-Lucent is the third largest player in the space after Ericsson (News - Alert) and Nokia Siemen. The company employs 77,000 worldwide.

 

Despite Alcatel-Lucent posting a $6.2 billion loss for 2008 after writing off $6 billion in assets, and the company’s own prediction that it will not see any operating profit in 2009, there are signs the company has made the correct steps to emerge ahead in this competitive market.

 

For starters, the $966 million in expected cost savings in 2009 should help the company carve some fat out of its global operations. However, despite a turbulent telecom climate, Alcatel-Lucent would have posted a full-year profit if not for the write-down.

 

In addition, CEO Verwaayen has said the company will shift focus to services and Internet-related technologies, moving away from its traditional telephone-switching equipment business.

 

Perhaps the biggest slice of the future Alcatel-Lucent pie will come from growing opportunities in China where the country is beginning to experience large scale investments in next-generation wireless networks.