Alcatel-Lucent cuts 10,000 jobs in turnaround plan

PARIS (Reuters) — Telecom equipment maker Alcatel-Lucent unveiled plans on Tuesday to cut an overall 10,000 jobs worldwide by the end of 2015, hoping to save 1 billion euros ($1.4 billion CAD) and turn the company around after years of losses.

The product of a 2006 Franco-U.S. merger aimed at creating a global giant, Alcatel-Lucent told a European works council meeting it intends to axe 4,100 posts in Europe, the Middle East and Africa, 3,800 in Asia Pacific, and 2,100 in the Americas.

This is the latest step in its "Shift Plan" announced in June to focus on networking products and high-speed broadband, and to lower fixed costs by more than 15 per cent.

"The Shift Plan is about the company regaining control of its destiny," Chief Executive Michel Combes said in a statement.

Shares in Alcatel rose two per cent in early trading and were up 1.7 per cent at 2.937 euros ($4.11 CAD) by 9:21 a.m. GMT. The stock has almost tripled in value this year on buyers' hopes that Combes, a former CEO of Vodafone Europe, can shore up the business.

The group, which employs 72,000 staff worldwide and competes with larger rivals Ericsson of Sweden, China's Huawei and Finland's Nokia, has posted five straight quarters of net losses.

France's CFDT union said it would fight a plan that entailed cuts to about 15,000 posts, although 5,000 new jobs will be created, making the overall loss 10,000. Nine hundred jobs would go in France, with the closure or disposal of five sites.

"The CFDT is aware of the seriousness of the situation and deplores this," it said in a statement. "But once again it is the staff that are paying the price ... We will fight this plan and make proposals to change it."

A source in the Socialist government, which has watched Alcatel-Lucent's problems closely as it battles rising unemployment in France, emphasized that the plan was an attempt to push the group on to a growth track.

"They are investing to get the machine going again," said the source, who declined to be identified. "The situation is serious, but it is understandable the unions are very upset."

Price pressure

The Alcatel-Lucent merger was an attempt to pool resources but any savings were lost due to fierce price competition in the sector and as slow economies, particularly in Europe, dented demand for telecom equipment.

Last year it swung to a net loss of 1.2 billion euros ($1.6 billion CAD) — the biggest since 2008 — largely because of a writedown on its mobile unit and restructuring costs from an earlier plan to lay off 5,000 workers.

The restructuring move will heighten speculation of a possible approach by Nokia, a move which sources close to the matter said last month the Finnish group was discussing internally.

Alcatel-Lucent confirmed it would dedicate 85 per cent of its research and development budget in 2015 to next-generation technologies, up from 65 per cent today. Spending on older technologies would be cut by 60 per cent.

By the end of 2015, Alcatel-Lucent will halve the number of its business hubs globally, it added.

The CFDT union said Alcatel was planning to close its sites in the French cities of Rennes and Toulouse quickly,and sell its Eu, Ormes and Orvault sites by the end of 2015.