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TMCNet:  Alcatel-Lucent CEO Unveils Strategic Plan

[December 12, 2008]

Alcatel-Lucent CEO Unveils Strategic Plan

Group Editorial Director
 
Alcatel-Lucent (News - Alert) CEO Ben Verwaayen spoke to media and analysts at a press conference today, announcing the company’s strategic plan for 2009 and beyond.

 
He appeared to say all the right things, promising to work closely with Alcatel-Lucent’s service provider, enterprise and application partners to “innovate, collaborate and partner… to stimulate a sustainable business model for the industry that will fuel innovation and the capital investment required to expand the overall web experience to more people and businesses.”
 
So what does this mean in practice?
 
First and foremost, Alcatel-Lucent is striving to get its financial house in order, announcing a goal of reducing its break-even point by 1 Billion Euros a year in 2009 and 2010. The company furthermore announced a planned reduction in workforce, eliminating approximately 1,000 management positions and lowering the number of contractor headcount by approximately 5,000.
 
Among the company’s cost reduction initiatives, newly minted CFO Paul Tufano spoke to the following goals:
 
·         To improve gross margin by reducing manufacturing, supply chain and procurement costs. At a high level, the plan calls for stricter pricing discipline and an improved, streamlined product portfolio.
·         Focus research and development activities on four key segments (Optical, IP, broadband and Applications enablement).
·         Reduce general and administrative expenses through the de-layering of the organization and the elimination of sales duplication between product groups and regions.
 
In terms of guidance, Verwaayen and Tufano believe the market for telecom gear and related deployment services will be down between 8% and 12% in 2009.
 
By implementing the changes outlined above, the officials offered a break-even forecast in terms of operating profit in 2009.
 
In 2010, Alcatel-Lucent is targeting to achieve a gross margin in the mid thirties range and an operating margin in the mid single-digit range, and looking ahead to 2011, the goal of the company is to achieve a gross margin in the mid to high thirties range and an operating margin in the mid to high single-digit range.
 
In order to achieve this strategy, Alcatel-Lucent will focus on three core constituencies: service providers, enterprises, and selected verticals. The company furthermore identified four key areas of investment: IP, optical, mobile and fixed broadband, and applications enablement.
 
At its most basic, the new strategy from Alcatel-Lucent comprises a plan to “combine the trusted capabilities of the network environment with the creative communications services of the web (Web 2.0, Web 3.0 and beyond).”
 
In order to realize this, the company is looking to become the provider of choice to deliver an open environment, allowing anywhere, anytime, any device access to a secure, high-quality network, offering privacy and billing integrity for consumers and businesses.
 
Alcatel-Lucent believes they are uniquely positioned to achieve this, and point to their long history of delivering fixed and mobile broadband, flat-IP networks to service providers and thousands of enterprises worldwide.
 
“The new management team is committed to rapidly executing this new strategy and leveraging the new streamlined organization,” said Verwaayen. “We are focused on delivering results and restoring profitability. I am confident we have now the strategy and the strengths to succeed.”
 
 

Greg Galitzine is editorial director for TMC’s (News - Alert) IP Communications suite of products, including TMCnet.com. To read more of Greg’s articles, please visit his columnist page. He also blogs for TMCnet here.

Edited by Greg Galitzine

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