Web 3.0 and beyond, but not for 6,000 staff and contractors
Alcatel-Lucent has said it will position itself to support "Web2.0, Web3.0 and beyond" business models, reacting to the future needs of its customers by re-prioritising investment in its portfolio of products and services.
The company will freeze R&D investment, and make cuts in several core areas, to focus engineering and technical support on next generation equipment and services support, Ben Verwaayen, ceo, said. The company will be focusing on three markets: service providers, enterprises, and selected verticals and on four key areas of investment: IP, Optical, mobile and fixed Broadband and Applications enablement.
Although no acquisitions were announced to help drive this focus, the company did say it would partner and co-source where necessary.
Verwaayen is betting the company's strategy on servicing the needs of its key markets to benefit from next generation web business models. This means combining web-based applications with "trusted" network and communications services, Verwaayen said
To do this, Al-Lu said it will invest in supporting open systems and platforms, as well as flat, next generation IP technologies.
LTE will be a key beneficiary, with resources being pulled from WiMax. HSPA+ will also be an investment target. Alcatel-Lucent will continue to support 3G CDMA progression path technologies, but will seek to shift all its customers, from 3GPP and 3GPP2 camps onto LTE for 4G networks.
Verwaayen told journalists and analysts, "I want to run a normal company, one that understands its purpose, is valued by its customers and returns a fair return to is shareholders. The choices we are making today are strategic choices, and the shift we are going to make will be pretty dramatic. They are really well thought through but they are not a piece of cake. We have to translate this into operational reality."
He added that he thought the story Alcatel-Lucent was telling was a "strong" one, that will gain traction and give the company "purpose" as well as "put momentum in the marketplace"
Financially, the company expects to see the market for telecommunications equipment and related deployment services to be down between 8% and 12% during 2009.
The company has targeted a break-even position for 2009, so it has said it will make savings for the full year of $750 million to achieve this. One thousand managers will lose their jobs from the company's 70,000 srtong workforce, and half the company's 10,000 contractors will be looking for new roles as well.
In 2010, with the set of actions described above, Alcatel-Lucent is targeting to achieve a gross margin in the mid thirties range and an operating margin in the mid single-digit range.
Looking beyond, the goal of the company is to achieve a gross margin in the mid to high thirties range and an operating margin in the mid to high single-digit range in 2011.
Responding to concerns that the business may not be viable if the strategy fails, or it falls victim to tough macro economic conditions, Verwaayen said, "The best thing we have going for us is that our customers are saying that they want us to be alive and kicking, and that's a very important element."