Alcatel-Lucent: A Turnaround Story Worth Noting

Most companies on life support are so far gone that it’s easier to flip the switch and let the company slip away peacefully into that good night. (Nortel Networks is one company that comes to mind.) Others are literally too tough to die and fight their way back to relative health. BlackBerry (BBR) is a great example of that.

But while much has been written about BlackBerry spitting in the face of death, much less has been noted about Alcatel-Lucent’s (ALU) difficult turnaround. A mere 18 months ago, the company was in dire straits—it was close to declaring bankruptcy and was burning through money as though it was on fire. Today, the company is on track to profitability, thanks in large part of major corporate belt-tightening as well as the three “R”s—refinancing, refocusing and restructuring.

“We have turned the corner financially,” said Tim Krause, Alcatel-Lucent chief marketing officer, addressing a crowd of about 100 journalists and analysts during the company’s annual Technology Symposium Nov. 12. “I feel like we are coming through the end of that, and we want you to be clear about where we are in that space.”

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Indeed, CEO Michel Combs, who joined Alcatel-Lucent in 2013 and the financial crisis, noted during the event that restructuring was particularly critical to get the company on level ground.

“Restructuring was critical for us to be able to be profitable again and invest in our future. One commitment we made was a cost reduction of 950 euros on fixed costs of 6 billion. We’ve realized 745 million euros so far, which puts us on track or slightly ahead,” he said. “This has given us ability to reinvest in the future.”

And today, thanks to a more attractive refinancing strategy, Alcatel-Lucent has a “strong balance sheet and the ability to move forward into the future,” Combs said, adding the company has raised 5.5 billion euros to fix its balance sheet. Plus, the company has regained full ownership of its patents, which had been used as collateral against its earlier debts.

Today, the company is laser-focused in three areas: ultra-broadband, IP networking and cloud—areas that Krause noted just so happen to align with the way the networking space is heading.

“As fate would have it, the markets in front of us are the markets we decided to focus on a year ago,” he said.

And the company is utilizing more partnerships—something the old Alcatel-Lucent admittedly never did well—to help it penetrate new accounts and target areas of growth. Hewlett-Packard (HPQ) is one notable partner, having aligned with Alcatel-Lucent’s software-defined networking (SDN) subsidiary Nuage Networks for its distributed cloud networking technology.

“Expect there will be other alliances when it makes sense for partners and Alactel-Lucent,” Combs said. “We also want to leverage service providers as a channel for our products and services. That is something we have done in past but not consistently, and we intend to grow that in next few quarters, providing value to deliver new services to their customers.”

The channel also will help Alcatel-Lucent move downstream into the enterprise. In one of its first partnerships, the company is working with Accenture on a branded offering designed to increase its visibility and impact on enterprise networking.

“The enterprise is a place where the network becomes part of delivery model, but it’s not a place where we have a household brand,” Krause said. “But in the enterprise, the Accenture brand is powerful. So it’s one of the areas where we’re looking forward to going to market together.”

Alcatel-Lucent has more plans for the channel (stay tuned for that, coming soon). Combs noted the company wants to expand its footprint set to go to market both directly and indirectly. “We want to establish an indirect business model to capture new opportunity, and we have aligned the company on that,” he said.

It’s one thing to say things are better, and quite another to show just how much better things are. Alcatel-Lucent has not only taken itself off life support, but it has sprung out of the hospital bed with vigor. Let’s hope the next phase of its renewal includes a healthy dose of the channel.