Alcatel-Lucent hopes shift to IP networking and ultra broadband will lead to profit by 2015

Alcatel-Lucent CEO Michel Combes announced major strategy and management changes under the company's new 'Shift Plan'

Alcatel-Lucent will refocus on IP networking and ultra-broadband access in mobile and fixed-line networks as it seeks to return to profitability by 2015.

Announcing the company's "Shift Plan" in Paris on Wednesday, CEO Michel Combes said the company now recognized that the markets for core networking equipment and access networks are very different, and will in future manage its activities accordingly.

In core IP networking, where an explosion in data traffic and the move to cloud computing is driving purchases, Alcatel-Lucent will pursue a revenue growth strategy, he said. On the other hand, the company will aim to maximize cash and profitability in access networks, where customers are upgrading or replacing existing equipment and sales are flat, he said.

Combes said he aims to sell off €1 billion in assets and to cut annual operating costs by €1 billion. However, he refused to say whether that will result in further job cuts.

The senior management team will be restructured to match the new priorities. In the core networking business, Basil Alwan will lead the IP routing and IP transport activities, and Andrew Mcdonald will run the IP platforms activities. In the access networks business, David Geary will run wireless operations and Federico Guillen the fixed networks operations.

CFO Paul Tufano will step down once the Shift Plan is under way. Tufano is moving for personal reasons, Combes said.

Alcatel is pinning its future wireless hopes on FDD (frequency-division duplex) and TDD (time-division duplex) LTE networks, and will halve its research and development investment in legacy 2G and 3G access technologies.

"This will be done in close relation with our customers," Combes said. "Some of our customers have already announced when and how they want to transition from legacy technologies to the new ones, and when they will sunset legacy technologies."

Even in the LTE domain, Alcatel-Lucent doesn't plan to develop everything itself. "We will explore partnerships on specific opportunities in small cells or in specific frequency bands that we don't address," Combes said.

The company has more than 50 percent of the U.S. LTE market, and strong positions in France and China, he said. In fixed-line access, "we have good positions in FTTx and VDSL with service providers," he said.

Peter Sayer covers open source software, European intellectual property legislation and general technology breaking news for IDG News Service. Send comments and news tips to Peter at peter_sayer@idg.com.

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