Alcatel-Lucent's big overhaul not so big
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Alcatel-Lucent’s new chief executive officer Ben Verwaayen today delivered a much-anticipated description of the equipment vendor’s corporate overhaul, but to many listeners, his plans either lacked detail or seemed to fall short of the broad, ambitious changes Verwaayen recently implied were needed to correct the company’s course.
In a research note following the event, RBC Capital Markets analyst Mark Sue called Alcatel-Lucent’s actions “pruning when a chainsaw might be required.”
In October, Verwaayen, then only two months on the job, promised big changes would be spelled out in today’s speech. “It’s not enough to run faster in the present lane,” he said then. “We need to think through what it is we need to do.” In particular, reducing headcount and exiting product markets would not solve the company’s problems, he said, as, “You can’t just cut your way to greatness.”
But cutting was a big part of the strategy overhaul he announced today, including plans to cut 1,000 managers and 5,000 contractors, reduce its breakeven point by 1 billion Euros and get out of the WiMax business (or at least use a partner for WiMax rather than focus on it internally). Verwaayen also said the company would trim spending on customer premises gear, CDMA and GSM while focusing intently on LTE as a wireless technology.
And many of the plans Verwaayen voiced today either reinforced previously made statements or just seemed modest. At one point, for example, he said “a very important element of our strategy going forward” was to be “alive and kicking,” as customers had told the company it must.
“I want [Alcatel-Lucent] to be a normal company,” Verwaayen said. “A normal company has a purpose in life that is understood, a relationship with customers that’s valued and a relationship with shareholders that they think they get a fair return. That’s my only ambition -- to be a normal company.”
Going forward, Alcatel-Lucent will focus on four areas it already serves: IP, optical, mobile broadband and fixed-line broadband. But Verwaayen vowed to blend technologies and innovation more effectively across those product areas than the company has thus far. “There were in the company for a long time people hugging basically boxes,” Verwaayen said. “’I’m from IP,’ ‘I’m from optical.’ If you want to have a really good shot at this opportunity, you need to be from the solution part; you need to be from everything.”
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© 2012 Penton Media Inc.
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