Alcatel-Lucent plans to reduce its workforce by 10,000 jobs, or about 14 percent, in a cost-cutting effort to turn around the struggling network equipment maker, according to reports by European newspapers Monday.
The company, which counted 72,000 posts among its global workforce in December, plans to cut 15,000 positions while creating 5,000 new jobs, according to Les Echos and Le Figaro. The cuts are reportedly part of an effort to trim 1 billion euros ($1.36 billion) in expenditures unveiled by Alcatel-Lucent CEO Michel Combes, who took over the helm of the Franco-American network equipment maker in April.
An Alcatel-Lucent representative confirmed the job cuts in a statement.
Combes took over for Ben Verwaayen, who resigned in February after four years at the helm, trying to turn around the fortunes of the Paris-based telecommunications equipment maker. However, the company, which was formed by a merger of the two former rivals in 2006, has struggled to compete with the likes of Sweden’s Ericsson and Chinese manufacturers such as Huawei.
For 2012, the company recorded a net loss of 1.2 billion euros, its seventh consecutive year of negative cash flow.
Updated at 10/8 8:25 a.m. PT with Alcatel-Lucent confirmation.
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Alcatel-Lucent announced today that Ben Verwaayen is resigning after serving four years as CEO of the Franco-American network equipment maker.
The imminent resignation of Verwaayen, who will stay on while the company’s board searches for a replacement, was previously reported by The Wall Street Journal.
“Alcatel-Lucent has been an enormous part of my life,” Verwaayen said in a company statement. “It was therefore a difficult decision to not seek a further term, but it was clear to me that now is an appropriate moment for the Board to seek fresh leadership to take the company forward.”
Verwaayen, the former head of BT Group, was tapped in September 2008 to be chief executive in a bid to turn around the fortunes of Alcatel-Lucent. The company has lost more than half its value since the two rivals merged in December 2006.
The Paris-based telecommunications equipment maker soon embarked on a significant restructuring as it tried to position itself to dominate telecom infrastructure in a post-recession world. But the past six years have been tough on the networking-equipment sector, particularly for the combined company, which has struggled to compete with the likes of Sweden’s Ericsson and Chinese manufacturers such as Huawei.
When the company reveals its 2012 financial results later today, analysts expect a decline in quarterly operating income of more than $1 billion — its seventh consecutive year of negative cash flow, according to the Journal.
Telecommunications infrastructure maker Alcatel-Lucent announced this week new technology that will help wireless carriers expand their networks to keep up with the explosive growth in mobile data.
The company announced this week a new compact cell phone antenna system called lightRadio, which incorporates radio technology and base station technology in a single box. The entire system, which can fit on a lamp post, is a fraction of the size of today’s cellular equipment. Current cellular networks require massive and power-hungry cell phone towers that house the antennas with a separate base station at the bottom of those towers that control the antennas.
When carriers have needed to add capacity or improve coverage, they’ve had to deploy these massive cell site towers. Alcatel-Lucent’s lightRadio system, which will be ready for carrier trials later this year, allows carriers to deploy new cell sites much faster and less expensively than they have been able to do in the past. It also means that carriers can reduce the electricity used to power the cell phone towers and base stations.
All in all, wireless operators can reduce the cost of deploying and maintaining a new cell site by almost half of what it is today.
That has huge implications for the wireless industry, which is struggling to keep up with demand for more data services from smartphones and tablet PCs. In fact wireless data traffic is expected to increase 26 times between 2010 and 2015 according to Cisco’s latest Visual Networking Index Forecast. Cisco conducts the survey every year to track network growth.
“It’s clear that the explosion in mobile data will continue,” said Wim Sweldens, president of Alcatel-Lucent’s wireless division. “The architecture that Alcatel-Lucent is proposing will help avert a potential wireless crisis. If carriers don’t move in this architectural direction then the problems we are starting to see today will only get bigger. And growing the networks will not be economically viable.”
Wireless carriers have been preparing for traffic increases by adding more capacity to their radio networks as well as their back-haul networks that carry the traffic from the radio towers to the Internet. The wireless industry has been pushing the Federal Communications Commission to make more wireless spectrum available so that they can increase capacity. But getting new spectrum into the market takes time.
One way to add more capacity to the available spectrum is to deploy more cell sites that are smaller in area. Splitting cell sites means that wireless operators can serve more customers or provide more bandwidth to individual customers in each cell site.
Carriers have already begun using a mix of a smaller and smaller cell sites in their networks. For example, femtocells provide personal cell sites that can be in a home or business. The smaller cell sites are connected to a home or office broadband connection to improve wireless indoor coverage.
But splitting cell sites on a macro level in a metropolitan area is a little trickier if the old cell tower and base station architecture is used. Getting new cell towers approved is time consuming. And putting up those towers is expensive. It’s also expensive to run these towers, which means long-term this architecture isn’t viable.
That’s where Alcatel-Lucent says it’s lightRadio technology comes in. It would allow wireless operators to deploy smaller cell sites much more quickly and at a much lower cost.
“We are applying the same principles that we’ve talked about in using femtocells for the entire mobile network,” Sweldens said. “We start by replacing the big towers with smaller elements that are easier to deploy, use less power, and connect smaller sites to broadband infrastructure that is already in place. So we can take advantage of the cloud-like architecture to get better economies of scale that either lead to reducing costs for operators or the ability to deliver more bits at the same cost.”
The new technology has other important benefits as well. Because the antennas are software configurable, carriers can use the same set of equipment to offer 2G, 3G, and 4G service from the same access point. What’s more, upgrading from one technology to another simply requires a software upgrade.
This is very different from what is done now. Today, when wireless carriers upgrade from a 3G technology such as EV-DO or HSPA to a next-generation technology, such as LTE, they are required to deploy new hardware. But with the Alcatel-Lucent lightRadio system, they simply do the upgrade in software.
But Alcatel-Lucent’s new technology, which is modular in design like building blocks in a Lego set, is not just a big improvement for existing wireless players. It can also be used to help other companies, such as cable operators, get into the wireless market at a much lower cost.
Cable companies already have a lot of high-capacity broadband infrastructure in the ground. And some of them also own wireless spectrum licenses. Cox Communications has used some of that spectrum to build a regional wireless network, while others such as Comcast and Time Warner Cable have invested in other wireless services like Clearwire.
“The future for any broadband provider is building one network that can serve customers whether they are mobile or at home,” Sweldens said. “Our new technology will help companies leverage their existing wireline infrastructure to provide wireless services. The cable MSO market is definitely one of our target markets.”
Alcatel-Lucent isn’t the only company that is developing smaller, more modular and wireless configurable cell phone access points. Market leaders, such as Ericsson and Huawei, have also been working on software-defined radio technology. But Sweldens believes that Alcatel-Lucent is the first company to announce plans for these products.
“This is indeed part of a general trend in the industry,” he said. “But what we’ve done is made a breakthrough by building the smaller cubes that fit together. We feel pretty confident that we are the first to commit to such a product road map. And that is the news.”
