Alcatel-Lucent outlined a “Shift Plan” aimed at transforming the company from a generalist supplier of networking solution into a specialist provider of IP Networking and Ultra-Broadband Access. The company is targeting Euro 1 billion in reduced sales, general and administrative (SG&A) expenses over the next three years as it makes a decisive in its industrial focus toward high-value equipment and services.
“Today we are taking comprehensive action to position Alcatel-Lucent at the heart of the digital ecosystem, a place from which we will be able properly to capitalize on our many strengths. The Shift Plan is fundamentally an industrial plan that also addresses the Group’s operational and financial challenges by putting in place a strong and fully accountable leadership team with clear goals and the appropriate levers to deliver on these goals and on our commitments to all stakeholders,” stated Michel Combes, Alcatel-Lucent’s CEO.
Key points of the plan:
- Grow revenues in Core Networking by more than 15%, from Euro 6.1 billion in 2012 to over Euro 7 billion in 2015,
- Lift operating margins from 2.4% in 2012 to more than 12.5% in 2015.
- IP, cloud and ultra-broadband portfolio at the center of operations, including WDM, 100G, IMS and customer experience product lines, as well as the ‘FTTx’ group of fiber-based connectivity technologies serving homes, businesses and other types of premises, vectoring, the 4G LTE mobile wireless access and small-cells.
- Bell Labs will continue to be the company’s innovation engine, with an 8% increase in R&D from 2013 through 2015. IP and Ultra-Broadband Access will represent 85% of R&D investment in 2015.
- Alcatel-Lucent’s intellectual property portfolio will become a dedicated profit center and will adopt an entrepreneurial approach to licensing in order to develop a solid revenue stream from its library of more than 30,000 patents and 16,000 applications.
- On a cash basis, The Shift Plan is expected to be self-funding over the 2013-2015 period. Once the company has clearly demonstrated the successful execution of the Shift plan, it plans to seek a reduction of its debt by approximately Euro 2 billion including through further asset disposals or through access to the equity markets in order to support its long-term strategic goals.
- The company did not announce any further job cuts at this time although reductions are planned.
- Alcatel-Lucent will reduce the number of countries in which it operates from 185+ to 145 countries. It will go from 100+ sales offices to 75 sales offices. It will consolidate warehouse and purchasing locations.
- The company will undertake a 40% cut in real estate and sites, reducing its footprint in non-strategic locations.
- In Manages Services, the company will address its 15 unprofitable contracts.
The new leadership team:
- Basil Alwan, IP Routing & IP Transport
- Andrew Mcdonald, IP Platforms
- David Geary, Wireless
- Federico Guillen, Fixed Networks
- Philippe Guillemot, Operations
- Philippe Keryer, Strategy & Innovation
- Robert Vrij, Sales
- Nicole Gionet, Human Resources
- Tim Keller, Legal
- Paul Tufano, CFO of Alcatel-Lucent, will step down from his role once implementation of The Shift Plan is under way.