Alcatel-Lucent’s workforce reduction has impacted several thousand more jobs than the company originally estimated, according to CEO Michel Combes.
Apparently, Combes is sharpening the company’s reorganization efforts. Last summer, under his predecessor Ben Verwaayen, the telecom equipment maker said it would slash 5,500 jobs by the end of 2013. However, in a conference call with analysts, Combes said 7,500 jobs had been eliminated during the first half of this year, and more cuts are in the works.
“In the next coming quarters, there will be some impact from additional departures we are managing and generating right now,” he said.
The additional workforce reduction comes as Alcatel-Lucent exits managed service contracts. To date, the company has cut 3,900 workers tied to those, and 3,600 of the 5,500 workers it expects to let go by the end of 2013.
At the end of 2012, Paris-based Alcatel-Lucent had 72,344 employees worldwide, of which 16,507 employees worked in North America. Under the workforce reduction announced last summer, the company planned to leave its next-generation R&D staff untouched. Instead, it focused the layoffs on workers tied to unprofitable lines of businesses and legacy technologies. Combes is sticking to that strategy, as evidenced with the reorganization plan he unveiled in June.
The re-org, which Alcatel-Lucent calls “the Shift Plan,” aims to rebalance R&D for legacy technologies to new technologies. “We plan to increase R&D spending in the short-term to accommodate development in LTE. We expect a positive impact from this in the coming years, when we scale down R&D in legacy technologies,” Combes said.
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 area
The restructuring 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. Of course, as assets are sold off or otherwise wound down, further workforce reductions are bound to follow.
Correction: An earlier version of this story incorrectly described the reason for the additional workforce reductions. They are due to Alcatel-Lucent exiting managed service contracts.