Alcatel is considering filing for bankruptcy
Alcatel-Lucent (ALU) announced on Dec. 12 that it will reorganize its divisions, shift its product strategy away from declining markets, and slash 1,000 management jobs and 5,000 contractors. The move prompted one analyst sarcastically to ask the Franco-American equipment maker’s newly appointed chief financial officer, Paul Tufano, whether such restructuring—Alcatel’s third in three years—is a trend that can be expected to “continue for perpetuity.”
Chief Executive Ben Verwaayen made it clear that’s not his intention. His goal, he said, in describing the reorganization and new strategy, is for Alcatel-Lucent to become a “normal company,” one with a “clear purpose” that can earn a “fair return” for shareholders.
Shares Sink on Earning Forecast
The company certainly isn’t there yet. In the short to medium term, “the share price is going to go nowhere,” predicts Richard Windsor, a global technology specialist with Nomura Securities in London. Alcatel-Lucent shares sank 11% in Paris trading on Dec. 12 after the company forecast that the market for telecommunications equipment will decline 8% to 12% next year and that it expects operating results only around breakeven for the year. By 2010, Alcatel-Lucent says it hopes to achieve operating margins in the mid-single-digit range.
Verwaayen acknowledges that it will take time to turn the company around and implement his new strategic plan. “The shift we are trying to make is pretty dramatic,” he says. “What we have to do now is translate this into operational reality.”
And how. Alcatel-Lucent hasn’t made a profit since France’s Alcatel and U.S.-based Lucent Technologies merged in 2006. Former Lucent Chief Executive Officer Patricia Russia and Alcatel Chairman Serge Tchuruk, the architects of that merger, were ousted last July and replaced in September by Verwaayen and Philippe Camus. Verwaayen, who is credited with turning around British telecommunications operator BT Group (BT.L), was brought in to pull off similar results at Alcatel-Lucent. But he took over just as the economic downturn started to take hold, causing further pain in a sector that was already struggling. In a sign of the times, Alcatel-Lucent rival Nortel Networks (NT) is reportedly considering filing for bankruptcy.
Tags: Alcatel, Alcatel-Lucent, ALU, Bankruptcy, Nomura Securities, Paul Tufano, Richard Windsor, Serge Tchuruk
