Alcatel-Lucent Failing ? Are Big Mergers Good?
Alcatel-Lucent just posted a second-quarter net loss of 1.1 billion euros and said its chief executive, Patricia F. Russo, and its chairman, Serge Tchuruk is stepping down by the end of the year.
The NYTimes has the story. The net loss, equivalent to $1.7 billion, was vastly larger than analysts had expected, and far exceeded the 586 million euro loss in the April-June period last year. The loss resulted in large part from an 810 million euro ($1.27 billion) write-down related to the company’s CDMA technology business in North America.
Investors had grown increasingly impatient with Alcatel-Lucent’s management. The company has not posted a profit since it was formed in November 2006 through the merger of Lucent Technologies, based in Murray Hill, New Jersey, and Alcatel, which is based in Paris.
Alcatel-Lucent is struggling to find a management structure that will work post merger. Lucent once the darling of Wall Street has faded in recent years. Here is what they are saying at Alcatel… “It is now time that the company acquires a personality of its own, independent from its two predecessors.”
Alcatel-Lucent has seen the decline of its CDMA network business in the United States, which declined at a faster-than-expected pace in the quarter as “a key customer in North America” cut its capital spending. It did not identify the customer. Networks based on Code Division Multiple Access, a mobile-network technology that was a major part of the portfolio that Lucent Technologies brought to the merger, is losing ground globally to GSM, or Global System for Mobile Communications, and another standard called CDMA-A.
What is going on here? I see it as a multifold problem. The infrastructure is changing at many levels both on the carriers side and the enterprise side. CDMA is dying and the enterprise is very tight. Competition is cutthroat in enterprise infrastructure. Clearly a victory for Cisco. Alcatel-Lucent can’t lag and must focus on their core markets. Is this a case of ‘too many theaters”?
In both the carriers and enterprise markets Alcatel-Lucent can’t be laggards.