Alcatel-Lucent (ALU) says that roughly one of every seven workers will be let go as the telecom equipment giant makes a last-ditch effort to turn its business around. About 20% of the 10,000 job cuts will take place in North and South America, with the rest split between Europe, the Middle East, Africa, and the Asia Pacific region, where 3,800 people will lose their jobs. Alcatel-Lucent is headquartered in Paris, and CEO Michael Combes reportedly briefed French government officials on the cuts before announcing them publicly. Roughly 900 jobs will be lost in France, and the country’s CFDT union has said it will fight for changes to the company’s plan.
The workforce reduction is a part of Alcatel-Lucent’s Shift Plan, announced last June by its new Combes shortly after he took over as CEO. Combes wants to refocus the company on IP networking and mobile broadband by concentrating jobs and research dollars in those areas.
Alcatel-Lucent has not made money for more than a year, and so far has failed to gain a strong foothold in the fast-growing market for LTE equipment. In addition to sluggish worldwide demand for many of its core products, Alcatel-Lucent has been hurt by lower-cost Asian competitors Huawei and ZTE.
Telecom equipment workers laid off by Alcatel-Lucent will follow in the footsteps of thousands of NSN employees who have also lost their jobs during the past two years. NSN (Nokia Solutions and Networks) is one of Alcatel-Lucent’s top competitors, and has also been struggling in the face of weak demand for telecom equipment. After laying off a significant portion of its workforce, NSN has been able to return to profitability and has won some key LTE contracts. NSN is now the primary asset of Nokia, which is selling its device business to Microsoft, and Nokia is reportedly interested in a possible union with Alcatel-Lucent.
A leaner Alcatel-Lucent could present an even more attractive target for Nokia, but analysts say it will take more than job cuts to turn the company around. “What remains to be seen is how those human capital cuts will line up with the need to exit underperforming business activities,” said Jason Marcheck, research director for service provider infrastructure at Current Analysis. “Relative to, say, NSN’s turnaround plan, ALU still does not seem to be paring back as much on its product focus.”
Marcheck added that on the bright side, Alcatel-Lucent has been expanding in high-growth areas, including network virtualization. Last week Alcatel-Lucent said that it has brought together a notable group of partners to support its CloudBand ecosystem for network virtualization.
Alcatel-Lucent said it will create 5,000 new jobs in high growth areas of its business by 2015. However, the number of positions to be eliminated by that time will total 15,000, bringing the total number of job losses to 10,000.
Follow me on Twitter.
