Alcatel-Lucent (ALU) announced that as part of its strategic plan it would undergo a strategic transformation and would take some significant steps to realign its operations.
The company said it would be focusing on three markets, namely service providers, enterprises, and selected verticals and on four key areas of investment, consisting of IP, Optical, mobile and fixed Broadband and Applications enablement.
Alcatel-Lucent would initiate a set of actions designed to reduce its break-even point by 1 billion euros per year in both 2009 and 2010. As a part of these initiatives, Alcatel-Lucent expects to reduce the number of managers by approximately 1 thousand and the number of contractors by approximately 5 thousand. The company would also complete its existing restructuring initiatives as well as seek savings in real estate, support functions and discretionary spending.
Altogether, Alcatel-Lucent expects that, by the fourth quarter 2009 on a run rate basis, it should achieve total savings of 750 million euros at constant exchange rate, of which approximately one-third in the cost of goods sold and two-thirds in R&D and SG&A expenses.
For full year 2009, Alcatel-Lucent expects the market for telecommunications equipment and related deployment services to be down between 8% and 12% at constant exchange rate and expects to maintain a stable market share. As a result of the expected decline in volumes and given that the improvement in gross margin will only materialize towards the end of the year, the company's initial forecast is to achieve an adjusted operating profit around break-even in 2009.
In 2010, 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 company stated that its aim 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.
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