Alcatel-Lucent has completed the sale of 85 percent of its enterprise networking and communications business to Chinese investment company China Huaxin, the latest move by the company under its year-old Shift Plan to shed asset, cut costs and refocus on more profitable markets.
Under terms of the $255 million deal, China Huaxin will hold 85 percent of Alcatel-Lucent Enterprise, while Alcatel-Lucent will retain the other 15 percent. In addition, Alcatel-Lucent will continue to work closely with its former parent company in what officials described as a "privileged business relationship."
In a brief conference call with analysts and journalists Oct. 1, Alcatel-Lucent Enterprise CEO Michel Emelianoff said the new company has ambitious plans to double the size of the business within five years, transform it from one that sells products to one that deals in "business outcomes" and to become the world's largest enterprise communications vendor.
"The enterprise communications market is a market that is … fundamentally transforming itself," Emelianoff said during the conference call, noting the growing use of mobile devices and technology trends such as software-defined networking (SDN).
Alcatel-Lucent, which has had few financial bright spots since it was formed in 2006, has begun a huge transformation under the Shift Plan, which CEO Michael Combes introduced in 2013 in hopes of cutting costs and refocusing the company on growth areas, including IP networking and the cloud. The plan also calls for cutting as many as 10,000 jobs in hopes of saving $1.3 billion in expenses by the end of 2015, and shedding assets in hopes of gaining another $1.3 billion.
Speculation about Alcatel-Lucent looking to sell its enterprise business arose earlier this year, and in February the company announced its intent to sell it to China Huaxin. Now that the deal is done, Emelianoff and his executives start the process of growing the company in some highly competitive markets that include the likes of Cisco Systems, Microsoft, Avaya, Ericsson and Huawei Technologies.
Emelianoff said China Huaxin was the right company to buy Alcatel-Lucent Enterprise. The company has more than $1.26 billion in assets, is interested in long-term growth, is focusing on the communications industry and has been a long-time partner of Alcatel-Lucent. It also will help Alcatel-Lucent Enterprise in its efforts to grow in the booming China market, he said.
"China is a market where we need to grab a lot of market share," Emelianoff said.
The company needs investments, and Emelianoff said he is confident that it will get the support it needs from China Huaxin. Alcatel-Lucent Enterprise, which will be headquartered in France, has about 2,700 employees worldwide, 500,000 customers, operations in more than 80 countries, $1 billion in revenues and 2,500 channel partners, he said.
China Huaxin Chairman Yuan Xin said the company intends to support Alcatel-Lucent Enterprise over the long haul.
"Our long-term investment approach will help Alcatel-Lucent Enterprise deliver on its ambition while enabling us to strengthen our strategic position in the enterprise communications arena," he said in a statement.
Whether the company goes forward with the Alcatel-Lucent Enterprise name is unclear. Emelianoff was non-committal when asked about the name, saying only that Alcatel-Lucent Enterprise is currently the company's name, and that executives will have ongoing discussions regarding the name and future branding efforts.