Alcatel-Lucent to cut 5,000 jobs as part of new restructuring plan

Alcatel-Lucent (NASDAQ: ALU) said it will cut 5,000 jobs across all regions as part of a new restructuring program that it announced amid a net loss for the second quarter and lower sales, especially of network equipment. 

The company had warned earlier this month that it would post an operating loss in the second quarter and would miss its profit target for 2012. The job cuts, part of the vendor's new "Performance Program" restructuring, come after Alcatel-Lucent CEO Ben Verwaayen said in January that the firm would not make steep job cuts on the scale that rival Nokia Siemens Networks is undertaking to regain competitiveness.

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.

Overall sales were down 7.1 percent to $4.36 billion. In the company's networks business, sales slumped 9.9 percent year-over-year to $2.74 billion, and within that its wireless sales were down 18.7 percent year-over-year to $1.08 billion.

The company said some moderate or delayed spending by carriers drove declines in its 2G and 3G network sales. Alcatel-Lucent noted that sequentially, CDMA sales stabilized in the U.S. market and the company witnessed some good growth in China from network expansions. The vendor said its LTE business more than tripled compared to the year-ago quarter, and it noted LTE contract wins from C Spire Wireless and rural Texas carrier West Central Wireless.

The focus for the next several quarters--and the pressure--will be on Verwaayen to cut costs and get the company back to profitability. The company burned through $636 million in cash in the quarter, and Verwaayen also has to contend with rising investor concern about both the company's cash position and its share price. Alcatel-Lucent's stock has lost more than 80 percent of its value since Verwaayen took over as CEO in 2008, dropping 34 percent this year alone. And, according to Bloomberg, the company is now worth about one fifth of the $11.6 billion that Alcatel paid to acquire Lucent in 2006.

The new restructuring plan means the company will cut 6.4 percent of its 78,000 total employees. Alcatel-Lucent 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. The company will review and renegotiate or exit a quarter of its 68 managed services deals, many of which are up for renewal by the end of 2013.

"We can't be everything to everybody," Verwaayen said, according to the Wall Street Journal. He also said he firm will be "pragmatic" and "opportunistic" about selling additional assets.

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

Special Report: Wireless in the second quarter of 2012

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