Visitors walk at the Alcatel-Lucent booth at the Mobile World Congress in Barcelona February 28, 2012. Photo: Reuters
Telecom equipment maker Alcatel-Lucent announced plans on Tuesday to cut an overall 10,000 jobs worldwide in what its chief executive called a last chance to turn the company around from heavy losses.
The product of a 2006 Franco-U.S. merger aimed at creating a global giant, Alcatel-Lucent told a European works council meeting it intends to axe nearly one in seven of its employees. Altogether, 4,100 posts will go in Europe, the Middle East and Africa, 3,800 in Asia Pacific, and 2,100 in the Americas.
This is the latest step in a "Shift Plan" announced in June to focus on high-growth areas ranging from 4G mobile to high-speed broadband, and to lower fixed costs by more than 15 percent, saving a total of 1 billion euros ($1.36 billion).
"The Shift Plan is about the company regaining control of its destiny," Chief Executive Michel Combes said in a statement.
"Everyone knows this plan is the last chance. The company is in a very serious situation," Combes, the latest of three CEOs since the merger to try to stabilize the group, told Le Monde newspaper.
Including past measures, the total cost of the plan is 1.2 billion euros, an amount the company expects to fund through asset sales.
Shares in Alcatel rose 2 percent in early trading and were up 0.87 percent at 2.910 euros by 1211 GMT. The stock has almost tripled in value this year on buyers' hopes that Combes, a former CEO of Vodafone Europe, can shore up the business.
"The group is eating up a lot of cash and is unable to enhance its profitability, so some kind of change was needed to make sure it has a long-term future," said one Paris-based financial analyst who declined to be named.
The group, which employs 72,000 staff worldwide and competes with larger rivals Ericsson of Sweden, China's Huawei and Finland's Nokia, has posted five straight quarters of net losses.
UNIONS TO FIGHT PLAN
France's CFDT union said it would fight a plan that entailed cuts to about 15,000 posts, although 5,000 new jobs will be created, giving the overall loss of 10,000. Nine hundred jobs would go inFrance, with the closure or disposal of five sites.
"The CFDT is aware of the seriousness of the situation and deplores this," it said in a statement. "But once again it is the staff that are paying the price ... We will fight this plan and make proposals to change it."
The union said Alcatel was planning to close its sites in the French cities of Rennes and Toulouse quickly, and sell its Eu, Ormes and Orvault sites by the end of 2015.
A source in the Socialist government, which has watched Alcatel-Lucent's problems closely as it battles rising unemployment in France, emphasized that the plan was an attempt to get the group growing.
"They are investing to get the machine going again," said the source, who declined to be identified. "The situation is serious, but it is understandable the unions are very upset."
The Alcatel-Lucent merger was an attempt to pool resources but any savings were lost due to fierce price competition in the sector and as slow economies, particularly in Europe, dented demand for telecom equipment.
Last year it swung to a net loss of 1.2 billion euros - the biggest since 2008 - largely because of a writedown on its mobile unit and restructuring costs from an earlier plan to lay off 5,000 workers.
The restructuring move will heighten speculation of a possible approach by Nokia, a move which sources close to the matter said last month the Finnish group was discussing internally.
Alcatel-Lucent confirmed it would dedicate 85 percent of its research and development budget in 2015 to next-generation technologies, up from 65 percent today. Spending on older technologies would be cut by 60 percent.
The group has a long history of innovation, for example pioneering the DSL technology that has brought quick Internet to millions through standard copper telephone lines.
However, it has been slower to trim its costs than rivals such as Nokia Siemens Networks, which cut around a quarter of its workforce some two years ago.