The future of communications requires a convergence of IT and IP. There is, furthermore, a shift in organisational focus towards new growth markets, cutting costs, reducing complexity and strengthening its balance sheet
Amongst leading enterprises, Alcatel-Lucent has commenced a shift towards new modes of operation and commercial agility. It will invest in core networking for growth, and manage other businesses for cash generation, improving its financial stability. It will apply a new, differentiated approach to business management.
Planning for dynamic growth
The Shift Plan, as Alcatel-Lucent has named it, prioritises investment in flat architecture over the operation of legacy networks. It incorporates a dual approach to market - comprising 'Core Networking' and 'Access and Others' - that may be expected to address key market dynamics in distinct ways.
Core networking will focus on IP routing, transport and software platforms - with secular growth delivered by all-IP network transformation, market stabilisation achieved through transition towards new investment in optics, accelerated adoption of software through IMS and network virtualisation, and growth in services provision as migration to all-IP networks gathers pace and BSS is phased out and OSS is streamlined.
Wireless Access and Others will be managed for their cash generation, relative to core networking operations, within which an exclusive focus on TDD and FDD overlay will enable improved cost management and stronger, more forward-facing partnerships for the group. Managed services will be managed back to profitability as the group rebuilds pertinent business operations selectively.
Optimising the business
Alcatel-Lucent maintains a strong recurrent revenue stream, on expectations of 150mn euros per year for patent licensing to 2015. Its targets include 15 per cent revenue growth in core networking during this period, to profitability of 7bn euros. Access and others will have no revenue target, but will be managed for cash and profitability, with expectations of cash flow of more than 250mn euros.
The business mix represents a basis on IP revenue growth above all, with more revenue from IP routing in particular. Research and development will continue at strength, benefiting from reprioritised cost management elsewhere in the group - including reduced commitment to legacy R&D. The key financial target is to reduce costs from six billion euros to five billion euros with two years, in the main through rationalisation and radical transformation of the group's working structures and an optimisation of its capabilities.
Michel Combes, CEO of Alcatel-Lucent, who with his leadership team, devised and is delivering The Shift Plan, aims for a group that will be better leveraged and increasingly diversified, with stronger partnerships and more customers returning greater revenues and profitability.
