Alcatel-Lucent announces strategic shift with job and expense cuts

It's been coming for a while, but Alcatel-Lucent finally announced its "strategic transformation" plan. The company plans to save over 750 million euros (about 1 billion Yankee dollars) over the next year, along with getting rid of over 1,000 managers and 5,000 contractors.

Alcatel's goal is to reduce its "break even" point by $1.3 billion a year in 2009 and 2010, with savings coming from cuts in the cost of goods, R&D, selling, and general and administrative costs.  R&D will be more focused on optical, IP, broadband and applications areas, with CDMA getting short shift.

But it's not going to be easy. In 2009 Alcatel-Lucent expects the market for telecommunications equipment and related services to be down 8 to 12 percent, but it expects to maintain a stable market share. Today's forecast is looking at an adjusted operating profit around break-even in 2009.

Analysts say there's little hope of seeing dividend payments to stockholders over the next three years, and they didn't hear anything about the company unloading assets. Alcatel had been writing down assets in the wireless equipment business and some had hoped the company was going to dump its CDMA business and other under-performing assets.

Perhaps most disturbingly for the telecommunications sector as a whole, Alcatel-Lucent is predicting a bigger drop in the market than other manufacturers. Nokia Siemens Networks is predicting a 5 percent (or more) drop next year; Alcatel says its "or more" is 8 to 12 percent.

For more:
- Forbes flames Alcatel-Lucent's reorg plan. Article.

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