Alcatel-Lucent is back in the game after dramatic restructure, says CEO

12 Nov 2014

Alcatel-Lucent CEO Michel Combes speaks at the Alcatel-Lucent Technology Symposium in Basking Ridge, New Jersey, today

BASKING RIDGE, NEW JERSEY – Alcatel-Lucent is two-thirds of the way towards achieving its €1bn cost savings target by the end of 2015, giving it the firepower to keep investing in R&D, CEO Michel Combes said today.

A year ago, the Paris-headquartered telecommunications equipment company was teetering on the edge of bankruptcy. Today it is “back in the game” said Combes, reporting revenue growth in IP routing and focusing on opportunities in IP, cloud and ultra-mobile technologies.

Combes said Alcatel-Lucent has made 32 new customer wins in the first nine months of this year and he believes the company is back to making inroads in the telecoms industry, having recently held its first investor day since it acquired Lucent in 2006.

He said the opportunities for the company in 2015 include the shift to software-defined networks and network function virtualisation.

He said the company has already achieved €645m in cost savings and is more than two-thirds of the way towards its target of €1bn by the end of 2015.

“This has given us the ability to re-invest in our future and we are able to invest more in innovation.”

Combes said that in the past 12 months, Alcatel-Lucent has managed to raise €5.5bn through more than 20 transactions involving debt and equity.

“Today we have a strong balance sheet and we have the ability to move into the future.

“Reimbursement of a secured loan in August allowed us to gain full ownership of our assets,” he added.

“We are now back in the game and this gives us the ability to regain our leadership position and continue shaping the market.”

He said the company has never had a stronger alignment between its product portfolio and what the market expects from the network to unlock opportunities in the digital economy.

Explosion in video traffic

“The industry is experiencing an explosion in video traffic and requires lots of room to manoeuvre for the foreseeable future. Networks are the foundation of the digital economy, which will be key for every single industry.”

He said there were three tenets to Alcatel-Lucent’s strategy – innovation, transformation and growth.

Industry problems that are opportunities for the company include limited connectivity, increasingly complex networks and unfulfilled commercialisation for telcos.

“Innovation is the unique asset that will help us lead our industry into the next phase.

“I was concerned when we didn’t have enough financial resources to invest in innovation. The good news is we have reduced costs everywhere and this has enabled us to spend €2.2bn a year on R&D.

“Our ambition is to reignite the innovation engine and lead the transformation of networks.

“We are intensifying our activities around innovation towards our vision of building Network 2020.”

On the business front, he said Alcatel-Lucent is going to embrace commercial partnerships with companies such as Intel, HP and Accenture, and will be more open to establishing partnerships with companies outside the telecoms sector.

“We are reinventing ourselves for sustainable success. It is an important time for us. We spent the last 18 months resetting the base of company. The company is back in the game and it is back to win,” Combes said.

“As we enter the second chapter of our restructuring, we have all the resources we need to be a winner in the next five years.”

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years