Alcatel-Lucent CEO: 'We need to generate cash,' turnaround plan to be announced June 19

Alcatel-Lucent (NYSE:ALU) CEO Michel Combes is a week away from announcing his new plans to turn around the struggling vendor as he seeks to put his own stamp on the company in the wake of former CEO Ben Verwaayen.

Combes, who has been at the post for a little more than two months, said he will look for ways to slow the company's cash burn so that it can focus on innovation, according to Bloomberg, which cited comments Combes made at a telecommunications conference organized by French newspaper Les Echos. Combes plans to formally unveil his scheme on June 19.

"For two months now, I've been at in Alcatel-Lucent offices all day, every day," Combes said. "This company definitely knows innovation, and it has strong relationships with its clients. The real problem is that the financial situation isn't sustainable. We need to generate cash."

Alcatel-Lucent burned through around $708 million in cash during the first quarter, worsening the year-earlier free cash flow loss of nearly $215 million. Verwaayen instituted a cost-cutting program to save more than $1.68 billion, with around 5,500 job cuts. However, that has failed to stem the tide of weak financials. Combes has said he will look to use divestments and partnerships to help cut losses, according to Bloomberg.

Combes, a former CEO of Vodafone Europe, undertook a $3 billion cost-cutting program while at Vodafone to slash jobs and spending on network gear and logistics. "Alcatel-Lucent is facing a strategy, operational and financial crisis," Combes said. "I've been faced with similar situations in my career. It's diagnosis first, then choosing people internally and externally to help bring confidence back and put things into motion."

Alcatel-Lucent is not the only network equipment vendor in long-term planning mode. Rival Nokia Siemens Networks announced its "Technology Vision 2020," a blueprint the company said is intended to profitably deliver 1 gigabyte of personalized data per user per day within the next seven years. The company listed six pillars of the vision: enable 1,000 times more capacity, reduce latency to milliseconds, teach networks to be self-aware, personalize network experience, reinvent telco for the cloud and flatten total energy consumption.

Hossein Moiin, executive vice president of technology and innovation and a member of NSN's executive board, said the key word overriding all of these efforts is profitability, not just for network operators and vendors but for end users as well. To support 1,000 times more capacity, the industry must "reduce the cost of production of each gigabyte of data by a factor of 50 over the next seven years," Moiin told FierceBroadbandWireless.

Nokia Siemens has restructured itself to focus on mobile broadband. Concurrently, the company has been cutting jobs since 2012, though the process is now largely completed. The company has said it will cut up to total of 17,000 jobs by the end of this year, and has been jettisoning non-core units and assets. As a result, the company has bounced back to financial health: In the first quarter of 2013, NSN achieved underlying profitability for the fourth consecutive quarter and positive cash flow for the sixth consecutive quarter.

For more:
- see this FierceBroadbandWireless article
- see this Bloomberg article

Related Articles:
NSN lays out plans for the '5G' mobile network of 2020
Alcatel-Lucent plans strategy review after Q1 loss
Alcatel-Lucent's new CEO faces cash flow challenge
Alcatel-Lucent names former Vodafone Europe chief Michel Combes as CEO
Analyst: Alcatel-Lucent has 'key ingredients' for a turnaround

Article updated June 13 to clarify the nature of Nokia Siemens' restructuring efforts and job cuts.

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