Axe falls again as Alcatel-Lucent goes from bad to worse

Mega vendor Alcatel-Lucent said Wednesday it would cut a further 4,000 jobs before 2009, bringing the total number of workers axed since the merger to 16,500.

The news came as the company reported its third consecutive quarterly loss, sinking to a shortfall of Eur258m during the three months to the end of September, compared to a profit of Eur532m in the same period last year. Revenues were down 7.8 per cent year on year to Eur4.35bn.

Chief executive Patricia Russo held onto her job despite rumours to the contrary, but chief financial officer Jean-Pascal Beaufret was not so lucky. Beaufret is stepping down to “pursue other opportunities” and will be replaced by Hubert de Pesquidoux, who currently leads the Enterprise Group of Alcatel-Lucent.

The company has also streamlined its regional structure and Russo has established a seven member management committee, which will report directly to her, in a bid to create a more focused and efficient operating model.

Two regional structures will be created, one for the Americas and one that includes Asia Pacific, Europe, Africa and the Middle East. Frederic Rose, who currently heads the Asia Pacific region, will assume additional responsibilities for the company’s current Europe & North and Europe & South regions. Cindy Christy, will lead the Americas region.

The headcount reduction plan is expected to result in incremental savings of Eur400m in gross margin and operating expenses by the end of 2009.

“These are difficult but necessary decisions, and we will manage these reductions with care. With this plan, the company is targeting gross margins in the high 30’s and operating margins of 10 per cent or better in the post integration phase beginning 2010,” said Russo.

“In spite of the promise of this industry and the long term benefits of the merger, we recognize that market conditions remain difficult, with continued pressure on revenues and margins due to intensified competition and some slowdown of spending in North America. These market conditions along with our commitment to transform the company for the long term lead us to put in place an aggressive three-part plan to improve profitability and reposition the business,” Russo added.