Alcatel-Lucent CEO Combes to step down Sept. 1

Alcatel-Lucent (NYSE: ALU) CEO Michel Combes will step down from his role on Sept. 1 as the vendor moves toward completing its deal with rival Nokia (NYSE:NOK); the combined company is going to be led by Nokia CEO Rajeev Suri.

Effective Sept. 1, and for the duration of the transition period, Philippe Camus, who is currently chairman of Alcatel-Lucent's board, will become the interim CEO. The firm said that COO Philippe Guillemot will be in charge of leading the operational management of the group, and CFO Jean Raby, who will be responsible for completing the proposed transaction with Nokia, said he will be "departing the group presumably" once the deal closes.  

Meanwhile, just like Nokia, Alcatel-Lucent reported stronger results in the second quarter. The vendor, which has struggled with profitability since the merger of Alcatel and Lucent in 2006, posted positive free cash flow of $71.2 million (€65 million), marking the first time it has had positive free cash flow in a second quarter since the Alcatel-Lucent merger. In the year-ago period Alcatel-Lucent had negative free cash flow of around $225 million.

Nokia and Alcatel-Lucent expect their $17.1 billion deal to close in the first half of 2016. "We are fully mobilized to achieving the free cash flow goal and have created an organization that is much more resilient than in the past," Raby said on a conference call, according to Reuters. "The Nokia deal is on track to be completed in the early part of the time line we gave, if not earlier."

Alcatel-Lucent said sales in the second quarter grew 5 percent to around $3.78 billion, slightly ahead of analysts' expectations, according to Bloomberg. The company said that adjusted operating profit rose 28 percent in the second quarter to around $192 million, producing a better-than-expected margin of 5.1 percent. Alcatel-Lucent's net loss narrowed to $59.1 million in the quarter from $326.6 million a year earlier.

The strong results at both Nokia and Alcatel-Lucent could put more pressure on larger rival Ericsson (NASDAQ: ERIC) to focus more on cost-cutting, efficiencies and higher-margin software deployments. "The merger is clearly building on very strong basis," Pierre Ferragu, an analyst at Sanford C. Bernstein, told Bloomberg. Ericsson will "need to put their house in order--more focus and more efficiency."

Sales in Alcatel-Lucent's wireless access unit fell 12 percent year-over-year to $1.26 billion. "Marked by a difficult comparison base in the year-ago quarter, the sales decline was driven by lower spending in the U.S. and project timing in China," the vendor said in a statement.

Alcatel-Lucent said sales in North America, the company's largest region by revenue, increased 2 percent to $1.67 billion, "reflecting a softer spending environment in the region compared to the year-ago quarter." Nokia is counting on its combination with Alcatel-Lucent to boost its position in North America.

For more:
- see this earnings release
- see this separate release
- see this Bloomberg article
- see this separate Bloomberg article
- see this Reuters article

Special Report: Wireless in the second quarter of 2015

Related articles:
Nokia CEO: ALU acquisition will make it 'very strong' in North America
Report: Alcatel-Lucent CEO Combes to depart for Altice in July
Alcatel-Lucent bosses back Nokia plan after receiving nod from key French committee
Alcatel-Lucent chief defends Nokia deal after revealing higher net loss in Q1
Alcatel-Lucent overcomes sluggish U.S. carrier spending in Q1, bumps up sales and margins

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