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Alcatel-Lucent details major restructuring plan

Vendor aims to reduce debt by $2.68bn by 2015, refocus on core strengths

The initiative will see the vendor focus on IP networking and superfast broadband access.
The initiative will see the vendor focus on IP networking and superfast broadband access.

France-based telecoms vendor, Alcatel-Lucent, has unveiled a major restructuring programme to reduce costs, slash debt, and focus on its most profitable areas of operation.

The initiative, named the "The Shift Plan", will see the vendor focus on IP networking and superfast broadband access, including 100G cable technology.

The vendor, which posted a loss of EUR353m in the first quarter of 2013, said that the three-year plan will achieve "a decisive shift" allowing it to concentrate on its telecoms customers' ability to deploy next-generation networks.

The firm said that it plans to reduce fixed-cost structure by EUR1bn, mainly by reducing sales, general and administrative expenses, refocusing R&D spending and improving operational efficiency. It also plans to generate at EUR1bn through the disposal of various assets.

The company plans to grow its revenues in core networking by more than 15% to EUR7bn in 2015, while lifting its operating margins in this segment to more than 12.5% in 2015, up from 2.4% in 2012.

Discussing the plan in Paris, Alcatel-Lucent's CEO, Michel Combes, said that the company would focus on developing its core network business for growth while its access business would be managed for cash.

The managed-for-cash businesses will include key wireless, fixed access and other businesses that will play an important role in the company's medium and long-term development.

Specifically, the company expects that this will create enhanced opportunities for its LTE and FTTx businesses.

The Shift Plan will also refocus 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.

"We are taking comprehensive action to position Alcatel-Lucent at the heart of the digital ecosystem, a place from which we will be able properly to capitalise on our many strengths," Combes said.

"The Shift Plan is fundamentally an industrial plan that also addresses the group's operational and financial challenges by putting in place a strong and fully accountable leadership team with clear goals and the appropriate levers to deliver on these goals and on our commitments to all stakeholders."

Nokia Siemens Networks, one of Alcatel-Lucent's two main European competitors, embarked on a major restructuring initiative in November 2011. It has since sold numerous business divisions that it deemed to be non-core.