Alcatel-Lucent profit leaves competitors envious

01 March 2012 | Guy Matthews

It’s never so busted that it can’t be mended, if there’s the will and the right driving force.

Equipment vendor Alcatel-Lucent has posted financials showing a full-year profit for the first time in the organisation’s history. The Paris-based company was formed in 2006 from the merger of two troubled operations, US-based Lucent and French manufacturer Alcatel. The promised synergies between the two parties did not, it is fair to say, emerge straight away. Many have pointed over the years to what they believe is the inherent cultural impossibility of marrying bureaucratic Frenchness with its polar opposite, free market Americanism.

The received wisdom on the years that have succeeded the merger has been all about nimble and aggressive competitors beating poor old AlcaLu to the punch on all the big deals. A narrative subplot has seen a weary old behemoth battling unsuccessfully with intransigent French trade unions to downsize to a competitive fighting weight.

But in the analysis, Alcatel-Lucent has done better than that. A critical difference has been made by the four-year tenure of CEO Ben Verwaayen, who had already proved his mettle by turning BT from an introspective sleeping giant into a 21st century force to be reckoned with. It seems like his sheen has rubbed off on a very different type of company that had its own unique problems.

AlcaLu’s positive cash flow and healthy EBITDA have not been achieved by a rising tide that has floated all boats, but in the teeth of a major global slowdown. Many in the telecoms equipment vendor community have become accustomed to being glad they are not as badly off as Alcatel-Lucent. They must now get used to envying it instead, and wondering how it got things righter than them. The company still has some way to go before it can pop too many champagne corks. But it’s headed in the right direction, through doing the basics right in a way that offers a lesson to anyone in the telecommunications ecosystem.

It has doggedly cut its costs, withdrawn boldly from unprofitable or non-core markets (via the sell-off of Thales and Genesys), and allied itself to growing markets (betting that the smartphone would compel carrier customers to upgrade networks). Now, it has decided to monetise some of the R&D it is sitting on by licensing its stock of patents. With all this in an economic downturn, what might it manage in a recovery?

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