UPDATE 2-Alcatel revamps organisation to cut costs
Mon Sep 10, 2012 2:24pm IST
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in.reuters.com
(Reuters) - French telecom equipment gear maker Alcatel-Lucent said it would restructure to centralise procurement, sales and marketing and reshuffle its management as part of a 1.25 billion euro ($1.6 billion) cost-cutting plan announced in July.
The group, grappling with high cash burn and lacking the scale of rivals Ericsson and Huawei, issued a profit warning and posted a loss in the second quarter following lower spending from its telecom operator clients.
It said on Monday it would move towards a global organisation for its four major business units, eliminating the prior regional structure and starting January 1, 2013, Alcatel-Lucent will be led by a streamlined executive committee with six members instead of 12.
No details were provided on where the 5,000 job cuts called for in the plan would take place, and a spokeswoman said further information on that would come before the end of the month.
Unions in France, where 9,500 or 12.5 percent of the 76,000-strong workforce is located, are alarmed about the job cuts and have met with ministers to ask for help from the newly elected government of Socialist President Francois Hollande.
Chief Executive Ben Verwaayen is entering his fourth year at the helm of the company formed in a 2006 merger. Despite his efforts to pare back products and cut 1 billion euros ($1.28 billion) of costs to improve profit and cash generation, the company's market value has shrunk to 2 billion euros, a drop of 93 percent from pre-merger levels.
After posting its first annual profit in 2011 since the merger, Alcatel-Lucent was hit by clients' spending cutbacks, especially in Europe, and the latest cost-cutting plan is Verwaayen's attempt to steady the ship.
Alcatel's competitors Sweden's Ericsson, China's Huawei, and Nokia Siemens Networks (NSN) have also been hit by spending cutbacks in Europe. NSN has embarked on its own cost cutting plan, which includes laying off a quarter of its staff and selling off product lines to focus on mobile broadband.
The reorganisation at the French firm brings together all of the products and software Alcatel-Lucent sells to telecom operators under the leadership of Philippe Keryer, who previously led the networks business. There will be a new business unit called "Core Networking" combining internet protocol and optics gear, two areas where Alcatel-Lucent has made strides in recent years.
Current Chief Financial Officer Paul Tufano will be put in charge of the global supply chain, as well as three business units, enterprise, strategic industries and submarine.
Robert Vrij, who used to head the Americas region, will head the global sales organisation and deal with operators.
Stephen Carter, who previously headed European marketing and communications, will now also oversee the cost-cutting as well as contracts where operators outsource work to Alcatel.
Verwaayen in July scrapped his initial guidance for operating profit margins to be better this year than the 3.9 percent of 2011, and declined to say whether the group would be profitable this year. In the second quarter, the firm posted an adjusted operating loss of 40 million euros.
Alcatel-Lucent shares, which are at all-time lows, were down 0.22 percent to 0.93 euros at 0847 GMT, while the Stoxx Europe technology index was down 0.47 percent.
($1 = 0.7812 euros) ($1 = 0.7812 euros) (Reporting by Leila Abboud and Gwenaelle Barzic; Editing by Elaine Hardcastle) |
