June 19, 2013 – Alcatel-Lucent (Euronext Paris and NYSE: ALU) today announces ‘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 mobilize the full range of Alcatel-Lucent’s assets and resources to achieve a decisive shift 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 organized 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 capitalize on Alcatel-Lucent’s recognized innovation assets, particularly its research laboratories, Bell Labs, while equipping the Company with the appropriate means to fulfill 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
- Euro 1 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 Euro 1 billion over the period of the plan
- Aiming at reprofiling the Group’s debt (Euro 2 billion) and, once the Company has clearly demonstrated the successful execution of The Shift Plan, a future reduction in debt (Euro 2 billion), to guarantee over the long-term financial sustainability.
Commenting on The Shift Plan, Alcatel-Lucent CEO Michel Combes said: “Today 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 capitalize on our many strengths. 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.”
Michel Combes added: “With The Shift Plan, which is designed to be self-funding, we are aligning realistic and deliverable ambitions with our core competencies. Over the next three years we are targeting Euro 1 billion of fixed costs savings, and carefully defined and timed asset sales expected to generate at least an additional Euro 1 billion.”
Under The Shift Plan, Alcatel-Lucent is planning to grow its revenues in Core Networking by more than 15%, from Euro 6.1 billion in 2012 to over Euro 7 billion in 2015, while lifting its operating margins in this segment from 2.4% in 2012 to more than 12.5% in 2015.
Over the same period, a strategic focus on cash management in wireless, fixed access and other businesses – emphasizing investment in 4G LTE, vectoring and fiber-based access systems while significantly reducing R&D spending on legacy technologies – is expected to deliver positive segment operating cash flow of more than Euro 250 million in 2015.
Michel Combes, who was appointed CEO on April 2, 2013, also announced that effective July 1, Philippe Guillemot is joining Alcatel-Lucent’s Leadership team as Senior Executive Vice President, Operations. Philippe Guillemot is a highly-regarded professional who has worked for a number of major, global businesses including Michelin and Valeo, where he held senior executive roles. He was also Chairman and CEO of Areva T&D.
Pending the appropriate information and consultation processes in a number of countries, Alcatel-Lucent’s management structure will be reorganized into four main business lines: IP Routing & Transport, IP Platforms, Wireless and Fixed Networks. These businesses will be supported by group-wide functions focused on Operations, Sales and Strategy & Innovation.