Alcatel-Lucent's Verwaayen: 'We have been too optimistic'

Alcatel-Lucent (NASDAQ: ALU) CEO Ben Verwaayen laid the blame for the infrastructure vendor's recent financial troubles on its own doorstep, and said the company will focus on cutting costs, research and development and perhaps monetizing its patent portfolio to help dig itself out of a hole.

CEO Ben Verwaayen


In a candid interview with the Financial Times, Verwaayen said the blame for Alcatel-Lucent's poor performance, especially in the second quarter, rests with the company alone. He said the firm had been too optimistic in its projections for the year.

"If I have to point fingers, I have to point at ourselves. I am not going to blame anything else than ourselves," he said. "Six months ago we went to the market and said [they should] expect profitability to be higher in 2012 than in 2011. It's time to look in [the] mirror and say we have been too optimistic."

Last week the company said it will cut 5,000 jobs as part of a new restructuring program that it announced amid a net loss for the second quarter and lower sales. Alcatel-Lucent reported a net loss in the quarter of $312.5 million, compared with a profit of around $53 million in the year-ago period. The vendor said it now expects total costs savings of around $1.54 billion by the end of 2013 due to exiting or restructuring unprofitable managed services contracts and possible exists from unprofitable markets.

Verwaayen said the solutions are "severe," but he also dismissed concerns that shareholders have been pushing for his ouster after a rocky period in which the company has not been consistently profitable. "I am highly motivated to do the right things for the company," he said.

The Alcatel-Lucent chief said the company will continue to focus on R&D as well as its patent portfolio, though he acknowledged that to make use of the patents would "require a dramatic change in how we are organized, and to ruthlessly simplify the organization."

Verwaayen's firm is not the only infrastructure vendor struggling. Ericsson (NASDAQ:ERIC), Nokia Siemens Networks and even Chinese vendors Huawei and ZTE did not report particularly strong second-quarter or first-half results overall. "We are not alone in this place," he said, "but that is not a very happy feeling as I would rather be in a market where everyone is thriving. I am not here to say look at the others. It is our situation, and we can solve it."

For more:
- see this FT article (sub. req.)

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