Alcatel-Lucent's Combes sets company's focus on IP, broadband opportunities

Alcatel-Lucent's (NYSE: ALU) new CEO Michel Combes has revealed his three-year turnaround effort called "The Shift Plan" that will focus its efforts on IP networking and ultra-broadband access opportunities, while cutting €1 billion ($1.34 billion) in costs by 2015.

Michael Combes, Alcatel-Lucent

Combes (Image source: ALU)

Under the plan, Alcatel-Lucent will refinance €2 billion ($2.68 billion) in near-term debt followed by a debt reduction of €2 billion ($2.68 billion). Combes said that the plan won't require additional debt or capital.

The key technology areas that "The Shift Plan" will focus on include WDM, 100G, IMS and customer experience product lines. It will also addresses the FTTx group of fiber-based connectivity technologies serving homes, businesses and other types of premises, vectoring, and wireless LTE wireless access and small cells.

With this new structure, Alcatel-Lucent will have four product divisions (IP Routing & Transport, IP Platforms, Wireless and Fixed Networks) and three group service divisions (Operations, Sales and Strategy & Innovation).

Alcatel-Lucent expects to increase its Bell Labs' unit R&D spending on these focus areas by 8 percent over the next two years. During this period, these focus areas will get 85 percent of the company's R&D budget while legacy products would be "managed for cash."

"With The Shift Plan, which is designed to be self-funding, we are aligning realistic and deliverable ambitions with our core competencies," Combes said in a release about the new plan. "Over the next three years we are targeting Euro 1 billion of fixed costs savings, and carefully defined and timed asset sales expected to generate at least an additional Euro 1 billion."

As the third CEO that's tried to revamp the struggling vendor, Combes has his work cut out for him. Since Alcatel-Lucent was formed in 2006 it has struggled to retain profitability amidst strong competition from Ericsson (Nasdaq: ERIC), Huawei and ZTE.

Some financial analysts, reports Reuters, said they felt that they wanted more details about how the plan will help the business grow. "Alcatel-Lucent's plan includes more of the same on restructuring, and not enough of the new focus," Alexander Peterc of Exane BNP Paribas told Reuters.

For more:
- see the release
- Reuters has this article

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