New Alca-Lu CEO to accelerate cuts and asset sales

Alcatel-Lucent's new CEO Michel Combes is expected to accelerate the company's €1.25 billion cost-cutting plan, which includes 5,500 job cuts, a labour union source told Reuters.

Combes' predecessor, Ben Verwaayen, was criticised for not pushing ahead quickly enough with a major cost-cutting plan and failed to deliver a promised turnaround in his five-year-long tenure as CEO.

Following a meeting with the new CEO, the union leader said Combes would take his time to decide on what Alca-Lu units might be sold off, having gained a lifeline after agreeing to a controversial €2 billion funding package in January.

"Michel Combes explained that it was imperative to go more quickly on the plan to cut jobs," the union source told Reuters, who declined to be named because the talks were internal.

"He doesn't reject the idea of asset sales if they make sense, but we are no longer in an urgent mode to sell under pressure from the markets."

Industry analysts with Morgan Stanley and Bernstein Research have voiced their opinions that Combes should instigate a major overhaul of the company, including an exit from the loss-making fixed-line and fibre optics businesses.

Bernstein Research analyst Pierre Ferragu said that a more radical revamp of Alca-Lu's activities is needed but is not sure when it will happen.

"For the time being, it seems that Combes does not have the backing from the board to implement radical changes to the company's perimeter," Ferragu told Reuters. "But Combes could later come back to the board in six months or a year and seek support for bolder change."

However, a person familiar with the company's thinking cautioned: "The mission Combes has been given by the board is to turn around the company. It is not a question of dismantling everything or sticking with the approach of Verwaayen. He will review every aspect (of the strategy). There will be no sacred cows."

Separately, Alca-Lu is looking to boost its financial flexibility by reducing the nominal value of its shares and make its first moves towards raising capital in the future, bankers told the Financial Times.

The loss-making equipment supplier is ready to ask shareholders to support a reduction of the nominal value of its stock from €2 to €0.05 at its AGM scheduled for next month. Alca-Lu has been blocked from issuing any new shares or convertible instruments since November 2011 as its shares have been trading below the nominal value. The group's recent three-month average trading price has been €1.18.

For more:
- see this Reuters article
- see this Financial Times article (reg. req.)

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