Telecom Timeout

Feb 5 2009   10:27PM GMT

Alcatel-Lucent’s earnings: Moving to half-full

Kate Gerwig Kate Gerwig Profile: Kate Gerwig

It’s much harder to see the glass as half-full when you’re used to half-empty — or completely empty. Enter Alcatel-Lucent’s 2008 year-end financial results and its $6.2 billion loss. So it may not sound like it at first, but there’s something in that glass, and CEO Ben Verwaayen, who took the top post in September 2008, is starting to hear the Perrier fizz.

Alcatel-Lucent stock went up after the Q4 ’08 earnings report (released Feb. 4) -– which isn’t easy to do this year. The new chief sees positive signs in things like cash flow being at its highest level in two years, as he explained his view of the company in a BusinessWeek interview. The company plans to make good on promises made last December to reorganize and refocus its strategy, and that means less emphasis on traditional products (read telephone switching equipment).

Verwaayen is shifting the company’s focus to services and Internet-related technologies, while placing less emphasis on traditional products like telephone-switching equipment. The analyst community sees Alcatel-Lucent as doing what it promised.

As part of its new strategy, Alcatel-lucent isn’t trying to do everything itself. To address certain hardware maintenance and expense, Verwaayen said the company may outsource legacy equipment servicing to established vendors that could “co-partner” with Alcatel-Lucent.

And to gain some nimble startup advantages — which is like turning the Titanic for a company the size of Alcatel-Lucent — Verwaayen said the company has asked its Bell Labs research division and its carrier product group to keep an eye out for innovative startups and work with them.

In December, Verwaayen said Alcatel-Lucent would focus on four broad areas in 2009: IP, optical, fixed-line broadband and mobile broadband (particularly Long-Term Evolution, or LTE).

In terms of strategy and services, Tom Nolle’s commentary, Telecom operators need vendor help to justify new investment benefits, discusses how Alcatel-Lucent is one of the main vendors that could help service providers sort out their next-generation network architectures. But only if it can get out of its own way and move forward with the new strategy.

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