Restructuring Could Hit Alcatel-Lucent’s Legacy Groups

Struggling telecom equipment maker Alcatel-Lucent is launching a restructuring that’s expected to include paring down its workforce as it reduces spending on legacy technologies and other areas of its business.

Alcatel-Lucent logoThe company’s restructuring, named “The Shift Plan,” aims to cut €1 billion in operating costs and generate more than that in revenue through the sale of assets between now and 2015. The company expects most of its cost cutting to affect its sales, general and administrative expenses and research and development work on older technologies. Last year, the company generated revenues of €14.4 billion.

At the end of 2012, the company employed approximately 72,000 people worldwide, of which 15,000 were in North America.

Where the Axe May Fall

While the company was quiet on which specific areas are likely to see layoffs, it did note key changes will include:

Refocusing of the Group’s R&D spending on IP Networking and Ultra-Broadband Access with an increased emphasis on co-development with major customers and partners, while at the same time significantly reducing spend on legacy technologies.

Alcatel-Lucent is moving away from investments in technologies like its SDH/Sonet optical networks, legacy ATM switching, 2G wireless networks and ADSL copper access, according to the company’s annual report. And although these require minimal R&D investments to support the installed base of customers, their allocations are likely to further shrink under the restructuring. IT professionals working in those areas are likely to feel the layoff bite.

Businesses Up For Sale

Alcatel-Lucent won’t say which businesses it plans to sell. However, based on the lagging performance of the terrestrial and submarine business – which handles intercontinental telecommunications trunk lines — in its Optics division, analysts believe it’s likely on the chopping block. Between 2011 and 2012, the unit posted a 20.3 percent decline in revenue.

“Although the company has not singled out specific divisions, we continue to believe that its Submarine optics & Enterprise business remain for sale with managed services and backhaul potentially additional disposal candidates,” Kai Korschelt, a Deutsche Bank analyst, said in a research note Wednesday.

Hanging On

Employees in the company’s IP networking, cloud technologies and Ultra-Broadband Access areas are likely to feel secure, given the company’s refocus on those growth areas.

In a statement, CEO Michel Combes said the restructuring was an action “to position Alcatel-Lucent at the heart of the digital ecosystem, a place from which we will be able properly to capitalize on our many strengths.”

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