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Alcatel-Lucent to restructure operations, shake up management

CFO Paul Tufano will take on additional COO role
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Alcatel-Lucent (NASDAQ: ALU) streamlined its management team and said it will focus on only a few core areas starting Jan. 1, moves the infrastructure vendor said are necessary to help it generate $1.6 billion in savings by the end of 2013.

The biggest management change is that CFO Paul Tufano will also take on the newly created role of COO to spearhead the company's plan to restructure its operations. The changes are part of the company's "performance program" that it announced in late July in conjunction with its weak second-quarter earnings. The plan involves 5,000 job cuts, or 6.4 percent of the firm's 78,000 total employees.

Alcatel-Lucent CEO Ben Verwaayen said in a statement that the company will focus on a "simplified business model" and play to its strengths, an indication that the vendor cannot be everything to every customer. Alcatel-Lucent had indicated as much in July when it said it would re-evaluate its existing managed services contracts.

Under the new business structure, Alcatel-Lucent will focus on four core areas:

  • Wireless, where the vendor will focus on serving its existing customer base in North America, China and EMEA.
  • Core Networks, for both IP and optical networks.
  • Fixed Networks, where it will invest further and create synergies with small cell deployments
  • Platforms, where the company will focus on its using its High Leverage Network capabilities in unified software platforms for control, optimization and network analytics.

"The management changes and the merger of the CFO and COO position show that the company is taking its restructuring program seriously, cutting costs and getting rid of unnecessary duplications," said Mirko Maier, an analyst at LBBW, told Bloomberg. "This is a positive sign. Getting costs under control will also help the company to remain independent."

Alcatel-Lucent reported a net loss in the quarter of $312.5 million, compared to a profit of around $53 million in the year-ago period. The company's adjusted operating loss, which was less than it forecasted, came in at $38.1 million, compared to an adjusted operating profit of $107 million in the year-ago period. Since forming in 2006, the company has produced only one year of net profit, in 2011.

Alcatel-Lucent's restructuring isn't as radical as that of Nokia Siemens Networks, which plans to cut up to 17,000 jobs as it shifts its focus squarely to mobile broadband. Nonetheless, it's a reflection of the increasingly challenging market for network equipment.

Alcatel-Lucent said the new structure will allow it to, among other things, focus on profitable markets and customers, streamline contracts and sales through a single global sales organization, manage its patent portfolio as a dedicated profit center, continue to focus on research and development, and concentrate on higher value-added contracts in managed services.

The vendor also announced several other management changes. Robert Vrij will become president of global sales and marketing. Stephen Carter will become president of managed services and will also oversee both the restructuring program and corporate marketing. Additionally, Philippe Keryer will become president of networks and platforms. This networks and platforms business unit will replace the company's existing regional operating structure with four global product and services business units.

For more:
- see this release
- see this WSJ article (sub. req.)
- see this Bloomberg article

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