Alcatel-Lucent's new plan: the old plan, but more so
Jun 20, 2013
Combes has unwisely decided to call it the Shift Plan (I wish they would consult with us about these things first and we could help them... yes, just take out the 'f'... so obvious. Does nobody at the Alcatel-Lucent 'c' level have a childish sense of humour?).
Combes says the company will sell €1 billion of assets, although there is little clarity on exactly what these are. Combes says it's wise not to show your hand. Alcalu will also reduce costs by another €1bn.
Most importantly, having slashed and disposed, it will concentrate on the IP network. The access network, where Alcalu has traditionally been strong in DSL and now vectoring, will be the profitable cash cow, while the core IP network is where it will put its efforts for the future.
It will also stay in the LTE market although it will be more open to partnering than it was before and, by definition, will probably gradually move out of the 2G 3G equipment markets.
One has to suspect that anything not directly tied to the core carrier IP equipment market is in danger of being disposed of.
The stock markets, hoping that something like this was on the cards, responded favourably and the Alcalu share price jumped up by between 5 and 7 per cent on the news.
When you boil it all down, turn-around strategies for sprawling technology companies usually involve chopping and focusing, the difference is usually how bold (or brutal) the chopping and how narrow the focus.
That can depend on recent history: in the case of Alcatel-Lucent the way must be clear for bolder chopping (I'm thinking of French government and union resistance) if only because the previous turnaround attempts by his predecessors, most recently by Ben Verwaayen, have failed to do the trick.
Verwaayen tried some re-energising and re-arranging, along with some serious cost-cutting, but the patient (or perhaps the market) failed to respond. Since 2008 Alcatel-Lucent was supposed to deliver something like €2.7 billion in cost savings but has only managed €800 million in cuts. So Combes now really only had the radical surgery option.
And he has another consideration. The telecoms infrastructure market - especially the core bits - appear to be heading for a radical technological and business model shake-up with the serious introduction of network programmability (SDN and NFV) in both the cloud/data centre and the service provider network. Whether the impact from that starts to bite over the course of the next 5 years or the next 10 is immaterial - telecoms networks are going programmable. That's probably a big disruption. It's certainly a vast sales opportunity if you get it right.
In this emerging market the best survival strategy may be to be 'best of breed' in something and forget about the total end-to-end solution approach. At least for the time being.
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