Alcatel-Lucent announces 10,000 job cuts globally
Telecom-equipment maker Alcatel-Lucent is to cut 10,000 jobs worldwide to reduce costs by 15 % within two years and focus on new technologies, it announced on Tuesday.business Updated: Oct 08, 2013 16:27 IST
Telecom-equipment maker Alcatel-Lucent is to cut 10,000 jobs worldwide to reduce costs by 15 % within two years and focus on new technologies, it announced on Tuesday.
The French-US company has lurched from crisis to false dawn to crisis since it was formed of a merger in 2006, and is restructuring and refocusing its activities to reverse losses.
Chief executive officer Michel Combes, who informed the company's European works council of the 'Shift' plan, said it was time for tough measures.
"We launched the Shift Plan in June to give Alcatel-Lucent an industrially sustainable future," he said.
"To carry out this plan we must make difficult decisions ... The Shift Plan is about the company regaining control of its destiny," he said in a statement.
The cuts represent about a seventh of the company's global work force of 72,000.
Alcatel-Lucent said 4,100 jobs would be cut in Europe, the Middle East and Africa by 2015, 3,800 in the Asia Pacific region, and 2,100 in North and South America.
About 900 jobs will be axed in France, and according to French economic newspaper Les Echos, two sites in the cities of Rennes and Toulouse will be closed and plants elsewhere sold.
"By the end of 2015, Alcatel-Lucent will halve the number of its business hubs globally," the statement said.
One analyst, who declined to be named, commented that the job cuts were "indispensable, even if there is damage to employment, otherwise this company was heading into a wall."
He said: "This is the last-chance plan. If they don't succeed this time, it's the end, but if they manage to carry it through, it's a company which should succeed in two or three years' time." Finnish group Nokia was adopting similar radical measures, he said.
Analysts at Bank of America Meryll Lynch said that "it is a big step in the right direction." The restructuring could enable Alcatel-Lucent to achieve an adjusted operating margin of 5.0-10.0 percent, and generate cash.
Another analyst commented that "we judge this plan to be credible", notably a strategy to sell assets, and praised the "remarkable" work carried out by Combes since his recent arrival in the top job.
Brokers Aurel BGC said that the company was "taking the bull by the horns" but without the support of broad opinion and of the government, application of the plan could be difficult.
Referring to this aspect, Bank of America Meryll Lynch said the fact that only 900 of the jobs were being cut in France might facilitate application of the restructuring. But in the short term, the company faced big restructuring charges and big capital investment to support growing business in China and the United States.
Alcatel-Lucent has been facing stiff competition from bigger rivals in Europe and Asia including Ericsson, Nokia and Huawei.
The new plan is aimed at transforming research and development and "reallocating spending to focus on future technologies while making a significant reduction of fixed costs," a statement said.
It wants to develop digital operations at the expense of some of the more traditional ones. The new technologies include 4G and IP platforms and ultra-fast fixed and wireless Internet.
The company will raise spending on research and development for future technologies to 85 % of the R&D budget from the current level of 65 percent.
The budget for outmoded or "legacy" technologies will be slashed by 60 percent, the statement said.
Alcatel-Lucent posted a loss of 885 million euros ($1.2 billion) in the six months to June this year, compared with a loss of 396 million euros for the same period in 2012.
The Paris-headquartered company had announced earlier this year that it would collaborate with US firm Qualcomm Technologies to develop so-called small-cell base stations to improve the quality of 3G, 4G and wifi network connections.