Alcatel-Lucent to chop 5,000 jobs

The fate of staff at Alcatel-Lucent Canada is unknown after the French company announced Thursday it will lay off 5,000 of its 76,000 employees around the world after reporting a US$308 million second quarter loss.

In a statement announcing the layoffs, CEO Ben Verwaayen said that it is clear from the deteriorating macro environment and the competitive pricing environment in certain regions challenging profitability that we must embark on a more aggressive transformation.

“We are therefore launching today The Performance Program to accelerate our transformation and reduce costs by Euro 1.25 billion (US$1.5 billion) by the end of next year in order to keep ahead of market realities. These times demand firm actions.”
The announcement comes at at time when several networking and telecom equipment companies have also announced layoffs including Cisco Systems Inc. and Nokia Siemens Networks.
A company spokesman said there has been no word on where the layoffs will hit. A statement is expected in September.

A-L’s Canadian division, which employees 2,500, mostly outside Ottawa in Kanata. The rest work in Markham, Ont. Customers include Shaw Communications, Wind Mobile, SaskTel, Telus, Ontario’s Orion education and research network. Enterprise products are sold through Bell Canada and IBM Canada, SSP Telecom and Arcom.

The company has struggled for profitability ever since in was formed in 2006 with the merger of Alcatel and Lucent Technologies. Last October it sold its Genesys call centre division, which has a North America hub in Saint John, N.B., for US$1.5 billion.
 Zeus Kerravala of ZK Research, said Alcatel faces two problems: Customers abandoning its older technology, such as CDMA-based carrier wireless equipment, in favour of 4G. Meanwhile, there’s low-cost competition from Chinese equipment makers Huawei Technologies and ZTE.

“Alcatel’s pretty well entrenched in the old world, and while they have a lot of next-generation products there’s a lot more competition,” he said. The data centre core router market is still dominated by Cisco and Juniper Networks, he added.

When the knife comes out the company should consider selling its Bell Labs division, once one of the leading developers of telecommunications technology. But, Kerravala noted, a tremendous amount of innovation today comes from startups and he wonders if A-L would do better buying young companies instead of having Bell Labs.

More than that, he said, “they have to find their niche in the market that will define them above and beyond their products. New product is important for any technology company, but it’s got to be wrapped in some kind of vision that lets their customers do things that no other company’s products can do.”

A-L still has strong market positions in Internet Protocol, next-generation optical transport and broadband access, Verwaayen said.

Among the ways it will save money is by exiting or restructuring unprofitable managed services contracts, he said.

Globally, A-L sales in North America, Western Europe and Asia- Pacific dropped by double digits compared to the same period a year ago – China sales alone plunged 21 per cent. On the other hand Central and Latin America recorded its seventh consecutive quarter of double digit growth, and in Eastern Europe there was “resilience.”

By lines of business, sales of enterprise products dropped 4.1 per cent compared to the same period a year-ago, although it was up 6.7 per cent from the first quarter. Software and services revenues decreased 6.6 per cent year-over-year (but were up 8.2 per cent sequentially). The network division, which includes carrier and Internet service provider wired and wireless routers and switches, saw revenues down 16.4 per cent year-over-year (but up 11.3 per cent over the first quarter.
One bright spot, the company said, is its LTE business, which more than tripled compared to the year-ago quarter

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