The job cuts are part of a larger transformation project that will include exiting some businesses and managing patents better, according to company officials.
Networking equipment maker Alcatel-Lucent
will slash another 5,000 jobs as part of a larger cost-cutting program, as the
company looks to stabilize its financial numbers, which have been under pressure
since Alcatel of France merged with U.S.-based Lucent in 2006.
Alcatel-Lucent executives announced the job
reductions and their plan to cut $1.5 billion in costs by the end of 2013
during a July 26 conference call with analysts and journalists to discuss the
companys second-quarter financial numbers.
CEO Ben Verwaayen and other executives cited
weakening demand for its products and an increasingly competitive market that
includes such rivals as China-based Huawei Technologies and Ericsson as the key
reasons for Alcatel-Lucents continued struggles. The officials said the
company lost about $308 million during the quarter, a year after turning a
small profit in the second quarter of 2011. Revenue for the quarter fell 7.1
percent from the same period last year.
Company officials hope the cost-cutting program
will help Alcatel-Lucent stem its losses, slow its spending and stabilize its
stock price. The company has undergone several similar programs in the past
under Verwaayen, with mixed results. Alcatel-Lucent posted its first profitable
year in 2011 since the merger, but 2012 has been less kind, and Verwaayen
admitted during the conference call that executives may have misread the
industry in their earlier forecasts for the year.
Through the latest transformation program,
Alcatel-Lucent not only will cut the 5,000 jobs from its workforce of more than
78,000, but also will exit underperforming markets, end less profitable service
contracts and try to leverage its patents, making them more of a profit center,
Verwaayen said during the conference call. He did not elaborate on what markets
the company will leave or which contracts it will end.
[I]ts more than cost saving; we have to
look to the structure of our choices, he said during the call. And the
structure of our choices means that you have to ¦ admit that you can't be
everything for everybody everywhere. And that means that you have to make those
The end goal is to create sustainable
profitability for the company, Verwaayen said. A sustainable profitability
for the company is the aim which you need to have, because all of the other
points derive from that sustainable profitability for the company.
He said the one area of the company that will
be spared significant cuts will be research and development.
R&D is the core capability of this
company, we are a technology company, it's a choice we made, Verwaayen said.
We are an innovation company, we will protect that part. So, we will attack
our cost structure in the rest of the organization, which is SG&A, which is
the fixed infrastructure in the organization.
Alcatel-Lucent becomes only the latest
company to turn to job cuts to help cut costs at a time of an uncertain global
economy and growing competition for increasingly tight IT dollars. Networking
rival Cisco Systems announced July 23 it was cutting
another 1,300 jobs
, even as it looks to bring on 5,000 new employees via
its upcoming acquisition of TV software maker NDS Group. The decision to reduce
the workforce by 2 percent came a year after the company announced 6,500 job
losses as part of an aggressive restructuring program.
Hewlett-Packard announced in May it was slashing
about 8 percent of its workforceas part of a
restructuring plan. Mobile phone maker Nokia said in June it was cutting
, while BlackBerry maker Research In Motionlike
Nokia, under pressure by Apple and device makers running Googles Android
OSannounced in July said it was cutting
as many as 5,000 jobs