Alcatel-Lucent focuses on LTE, will cut jobs and WiMAX: Equipment maker to eliminate 1,000 management jobs

Alcatel-Lucent is looking to 2010 to return to profitability as its implements a new strategic plan that will cut jobs, eliminate some contractors and shift the company’s focus.
During a conference call with reporters CEO Ben Verwaayen said the company will combine its capabilities of the network environment with creative services of the Web. The company also plans to invest heavily in Long Term Evolution and pull back on some technology such as WiMAX. Nortel Networks Ltd. made a similar move by offloading its WiMAX business to Alvarion Ltd. in June.
Verwaayen said LTE is a viable technology to invest in because carriers worldwide are planning to build their 4G networks using the technology. He said the company will also continue to invest in W-CDMA and CDMA2000 1x EV-DO. Areas where the company plans to reduce spending and streamline operations include WiMAX, GSM and CDMA 1x.
Alcatel-Lucent officials said 1,000 management jobs will be cut, and the company will also reduce the number of contractors by 5,000.
Along with unveiling the strategic plan, the company also announced four new members to the company’s board of directors.
Verwaayen unveiled the plan in an attempt to revive sagging profits by the world’s largest telecommunications equipment maker. Since the company was formed in 2006 with the merger of Alcatel SA and Lucent Technologies Inc., it has posted seven straight quarters of losses. The company has suffered internal clashes, changes in leadership and stiff competition in the market.
For the third quarter, the company posted a net loss of $51 million.
With the news of the plan, the company’s stock was trading Friday at $2.22, down about 20 cents per share.
New investment areas
Verwaayen said offering an open environment in regards to networks and the Web is vital to the company’s future. This will allow customers to use millions of Web sites from any device with the guarantee of security, quality, privacy and billing integrity. The overall experience for customers will be improved.
To achieve this strategy, the company will focus on three markets; enterprise, service providers and four areas of investment, which are IP, optical, mobile and fixed broadband and application enablement.
“We have a strategy here that gives us momentum in the market,” Verwaayen said. “We want 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.”
Newly appointed CFO Paul Tufano said the cuts in its workforce will be made to reduce layers in management. He said the company has more than 70,000 workers across the globe.
“The cuts won’t be in one region,” said Tufano, who joined the company Dec. 1. “You can expect it will be across the globe.”
Along with reducing the number of contractors, the company also will seek savings in real estate, support functions and discretionary spending, Tufano said.
The company finished the third quarter with $6 billion and has a credit line of $1.8 billion. Tufano said the company will also benefit from the sale of defense contractor Thales SA. The company is planning to sell its share of the company, which is a little more than 20%. Tufano said the sale could net the company as much as $2.1 billion.
The company projects that the cost saving measures will save the company almost $1 billion.
Alcatel-Lucent is also taking the approach because of the current economic climate. The company said the market for telecommunications equipment is down between 8% and 12%.
Tufano said the company is hopeful to have a break-even year for 2009 as it implements the new strategy and then turn a profit the following year.
“By 2010, we will have momentum,” he said.
New members of the company board are Stuart Eizenstat, a former deputy secretary of the U.S. Department of Treasury, Louis Hughes, CEO of GBS Laboratories L.L.C., Jean Monty, former chairman and CEO of BCE Inc., and Olivier Piou, CEO of Gemalto.
Out are and Daniel Lebegue and Jozef Cornu, who will remain with the company as a member of the Deutschland AG’s supervisory board and chairman of the Alcatel-Lucent Bell NV’s board.
The changes continue a revolving door in leadership at the company. In September, Verwaayen replaced Patricia Russo and Philippe Camus replaced Serge Tchuruk as chairman.
Verwaayen said he is optimistic as the company moves forward.
“It is not how brave you are,” he said. “It is not how good you are. It is how smart you are in reaching out to others.”