Is Ben hiervoor de juiste man?
Alcatel-Lucent Faces More Job Cuts to Match Efficient Rivals
By Adam Ewing and Marie Mawad - Nov 6, 2012 9:26 AM GMT+0100
Alcatel-Lucent SA (ALU) Chief Executive Officer Ben Verwaayen will need to eliminate an additional 10,000 positions to catch up with more efficient rivals as the unprofitable phone-equipment maker’s cash pile dwindles.
Even taking into account the 5,500 job cuts announced in October, Alcatel-Lucent’s revenue per employee was 49,700 euros ($63,600) last quarter, at least 14 percent less than those of Nokia Siemens Networks and Ericsson AB, data compiled by Bloomberg showed. Selling and administrative expenses as a percentage of sales, at 16 percent and compared with 11 percent for Ericsson and Nokia Siemens’s 10.5 percent, must be lowered for the French company to survive, said Alexander Peterc, an analyst at Exane BNP Paribas in London.
Enlarge image Alcatel-Lucent Faces Deeper Job Cuts to Match Rivals’ Efficiency
Nov. 2 (Bloomberg) -- Alcatel-Lucent SA Chief Financial Officer Paul Tufano talks about the third-quarter loss at the French phone-equipment maker and the prospect of asset sales. He speaks from Paris with Linzie Janis on Bloomberg Television's "Countdown." (Source: Bloomberg)
Enlarge image Alcatel-Lucent SA CEO Ben Verwaayen
“They are trying to reduce the cost base substantially with their latest restructuring effort, but this may be too little, too late,” said Peterc, whose 50-cent price estimate for the stock is 37 percent less than yesterday’s close in Paris. “Gross margins are just too low to support this.”
Into his fifth year as CEO, Verwaayen is considering asset sales to raise cash after losses and shrinking revenue have strained Alcatel-Lucent’s finances. The Paris-based company has consumed 700 million euros of cash on average annually since its merger with Lucent Technologies in 2006, prompting concerns about its ability to repay debt, some of which will be due starting next year.
Quarterly Loss
The shares added less than 1 percent to 79 cents at 9:24 a.m. Paris time. They have plummeted about 80 percent since Verwaayen took over in September 2008. The 60-year-old hasn’t reached his goal of making Alcatel-Lucent sustainably profitable, and last week reported a third-quarter loss of 146 million euros. Former chiefs Patricia Russo and Serge Tchuruk were driven out by a series of profit warnings that wiped out half of the company’s market value in the year after the 2006 merger.
Intensifying competition from China’s Huawei Technologies Co. and ZTE Corp. (000063), as well as declining sales of phone equipment in Europe have prompted some competitors to be more aggressive in scaling back their workforces.
Nokia Siemens, the venture between Finland’s Nokia Oyj (NOK1V) and Siemens AG (SIE) of Germany, announced plans a year ago to slash 17,000 positions, or 23 percent of its headcount. The cuts helped the equipment supplier report a third-quarter operating profit of 182 million euros and an adjusted operating margin of 9.2 percent. Profitability may climb to as much as 12 percent in the current period, Nokia said on Oct. 18.
Productivity Gap
Nokia Siemens, with 60,600 employees at the end of the third quarter, generated 57,770 euros in sales per worker in the period. The figure for Ericsson, the largest wireless-equipment maker with a workforce of 109,000, was 58,280 euros, according to its quarterly report.
To reach similar levels of productivity, Alcatel-Lucent, which will have 72,500 workers after completing the 5,500 job cuts announced last month, will have to lower its headcount to no more than 62,500.
“We are confident that we have laid the right plans to achieve the aims set in our performance program,” said Simon Poulter, a Paris-based spokesman for Alcatel-Lucent. “We are driving that program aggressively.”
Verwaayen so far has held back from more drastic job cuts. The former BT Group Plc (BT/A) CEO said in January that it was “out of question” to reduce the company’s workforce by 25 percent -- a proportion similar to Nokia Siemens’s.
Five Minutes
“Rather than trying to do something to please for five minutes, we want to do what’s right for the company,” Verwaayen told analysts last week. “We have to look at the reality of the market from a cost point of view, not assuming that Europe will come back next year.”
Verwaayen is balancing political backlash from President Francois Hollande, who pledged to block a parade of firings, with declining network investments from operators, especially in Europe. Chairman Philippe Camus was called in by government officials for a meeting in mid-2012 to discuss the manufacturer’s plans to eliminate positions.
Top union representatives of the French telecommunications companies have called for an industry-wide rally on Nov. 13 to oppose to job cuts. Labor officials at Alcatel-Lucent have also said they’ve called on ministry officials to step in.