Share

New CEO begins Alcatel make-over

Paris - Telecom equipment maker Alcatel-Lucent plans to focus on networking products and high-speed broadband and will slim down with a billion euros in cost cuts by 2015 in a bid to reverse years of losses.

The plan unveiled on Wednesday by Michel Combes, the company's new chief executive, will also include more than a billion euros of unspecified asset sales and €2bn in debt re-financing by 2015, followed by a further 2bn in debt reduction that could include issuing new shares.

Alcatel shares jumped more than 7% to a new year high in early trade.

"This plan goes in the right direction, but I believe some elements of it are not aggressive enough," said Pierre Ferragu, analyst at Bernstein Research, who thought the cost savings could have gone further in a tough competitive landscape.

Alcatel-Lucent, which competes with Sweden's Ericsson, China's Huawei, and Nokia Siemens Networks , has been unable to post regular profits and generate cash since it was formed in a merger in 2006.

Combes, who used to run telecom giant Vodafone's European businesses, is the third CEO to try to right Alcatel.

Combes explained that the group would reposition itself as a specialist player by focusing research and marketing efforts on its high-growth Internet Protocol (IP) networking products and very high-speed broadband in fixed and mobile. These priority areas will get 85% of the company's R&D budget, while older, legacy products would be "managed for cash".

The aim is for sales of IP products, which help direct data traffic inside telecom networks via specialised routers, to grow by roughly 15% to more than €7bn by 2015, or about half of group sales.

Combes also wants to improve the operating margins on IP networking from their current 2.4% to at least 12.5% and make the firm free-cashflow positive by 2015.

"To deliver on this strategic plan, we need to regain competitiveness - that means having the right products, quality of execution, and lowering our costs to be similar to peers," Combes said on a conference call.

Alexander Peterc of Exane BNP Paribas was hoping for more emphasis on what would drive the business forward.

"Alcatel-Lucent's plan includes more of the same on restructuring, and not enough of the new focus," he said.

Alcatel-Lucent shares have risen 40% this year on hopes that Combes can turn around the Paris-based group.

But its market capitalisation has shrivelled to €3.2bn ($4.3bn), far from its pre-merger levels of roughly $36bn.


We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.2%
Rand - Pound
23.90
-0.0%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.2%
Platinum
910.50
+1.5%
Palladium
1,016.25
+1.4%
Gold
2,220.89
+1.2%
Silver
24.88
+1.0%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders