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ALU focuses on two units with Shift Plan

CEO Michel Combes restructures company around IP Networking and Ultra-broadband Access


Published: 20 June, 2013

READ MORE: Financial | Alcatel-Lucent | Broadband | LTE

Alcatel-Lucent's CEO, Michel Combes, is determined to end constant restructuring and return the company to stability with a 2.5-year roadmap, called the Shift Plan.

On Wednesday, he set out his key financial objectives of restructuring around a limited number of businesses with growth and profitability; restoring free cashflow; and reducing debt by €2bn. That will involve €1bn of asset sales and a similar amount of other cost reductions. And ALU will narrow its R&D, product strategy and resources to focus on two main businesses - IP Networking for revenue growth and Ultra-broadband Access, whether wireless or wireline, for cash.

In carrier IP, ALU is on something of a roll, but its challenges in the wireless broadband sector remain tough, something that denies it the option of being heavily mobile-focused like Nokia Siemens. Instead, it has to try to compete with Ericsson and Huawei across the IP board, an ambition in which its wireless strategy, despite the strong lightRadio platform, is the Achilles' heel.

And ALU knows it needs to tighten up on execution in many areas. "I could blame the world for our difficulties, but the truth is we've missed product launches and been in too many geographies and businesses," Combes said.

He takes the helm in a far better position than Verwaayen. He can build on many of the reorganizations and the product strategies of his predecessor, and his timing is likely to prove far better. The recession show signs of lifting over the next couple of years in key markets; and notions which were core to Verwaayen's roadmap will move from blue-sky to mainstream during his tenure. For instance, the deconstructed RAN, epitomized by lightRadio's cloud architecture and small cells, is starting to make a commercial, not just a slideware, impact. And perhaps most importantly, Verwaayen presided over an intense concentration on IP infrastructure, leading to ALU becoming a significant challenger to Cisco, Juniper and Huawei in the carrier router space.

In this context, the heavy focus in the Shift Plan on IP gear, and supporting the move to the super-high speed internet, is fully justified. The two new core businesses will be IP Networking (IP routing, IP transport, IP platforms and associated services); and Ultra-Broadband Access (wireless and fixed access). Both will continue to build on ALU's strategy in recent years, of increasingly converging wireline and wireless activities as both center on IP. This allows it to be more cost efficient by combining R&D - drawing on the huge Bell Labs asset - and other resources.

It also enables it to provide an end-to-end solution for all kinds of operators (mobile, fixed, IPTV and quad play), although this is a challenge in itself because of the huge range of elements involved. The IP networking focus remains far broader than NSN's, for instance. One of the key questions will be whether ALU can plow sufficient resource and expertise in to each of these elements to compete effectively with the big two, and avoid being stuck with a 'broad but shallow' reputation.

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