Michel Combes outlines new strategic plan for Alcatel-Lucent

Alcatel-Lucent today announced ‘The Shift Plan’, a detailed three-year plan to reposition the company as a specialist provider of IP networking and ultra-broadband access, the high-value equipment and services that lie at the heart of the high-performance networks of tomorrow.

The Shift Plan will mobilise the full range of Alcatel-Lucent’s assets and resources to achieve a decisive swing in the group’s industrial focus that will concentrate the company on the priorities of its telecommunications customers as they deploy next-generation networks to address the explosive growth in bandwidth-hungry data traffic. This new focus on the fast-growing business segments of IP networking, cloud technologies and ultra-broadband access will be delivered by a management team organised around full profit-and-loss (P&L) and cash accountability.

Importantly, The Shift Plan entails a clearly differentiated approach to the management of high-growth businesses – core networking – as opposed to those that will be managed with cash generation as the clear priority. 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 capitalise on Alcatel-Lucent’s innovation assets, particularly its research laboratories, Bell Labs, while equipping the company with the appropriate means to fulfil its ambitions.

The key components of The Shift Plan include:

· A 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

· €1 billion (US$1.31 billion) in targeted reductions in the group’s fixed cost structure concentrated on actions to reduce sales, general and administrative (SG&A) expenses, refocus R&D and improve operational efficiencies

· Selective asset sales intended to generate at least €1 billion over the period of the plan

· Aiming at reprofiling the group’s debt (€2 billion) and, once the company has clearly demonstrated the successful execution of The Shift Plan, a future reduction in debt (€2 billion), to guarantee over the long-term financial sustainability.

Under The Shift Plan, Alcatel-Lucent is planning to grow its revenues in core networking by more than

15 per cent, from €6.1 billion in 2012 to over €7 billion in 2015, while lifting its operating margins in this segment from 2.4 per cent in 2012 to more than 12.5 per cent in 2015.

Over the same period, a strategic focus on cash management in wireless, fixed access and other businesses – emphasising investment in 4G LTE, vectoring and fibre-based access systems while significantly reducing R&D spending on legacy technologies – is expected to deliver positive segment operating cash flow of more than €250 million in 2015.