Combes Named to Lead Alcatel-Lucent Through Troubled Time

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BERLIN -- Alcatel-Lucent, the struggling French telecom equipment maker, on Friday hired a former Vodafone and France Télécom executive, Michel Combes, to lead the company through what might be a major downsizing.

Mr. Combes, 51, will take over for Ben Verwaayen, who had failed in four years to bring the equipment maker, created by the 2006 merger of Alcatel of France and Lucent Technologies of New Jersey, to sustained profit.

Mr. Combes left Vodafone last summer after agreeing to take over as chief executive of SFR, a French mobile operator owned by Vivendi. But the sudden departure of Jean-Bernard Lévy as Vivendi chief executive caused Mr. Combes to withdraw from the job.

In brief remarks to Alcatel-Lucent senior executives this morning in Paris, Mr. Combes outlined his plans to conduct a "listening tour" of employees, shareholders and other stakeholders before formulating a strategy for Alcatel-Lucent, which lost €1.4 billion, or $1.9 billion, in 2012 as sales fell 6 percent.

The company is in the midst of cutting 7 percent of its global workforce, some 5,500 of 76,000 jobs, by the end of this year.

In a statement, Mr. Combes said he would work to return Alcatel-Lucent to lasting profitability, something that has eluded the company since the trans-Atlantic merger.

"This is a company I know well and I look forward to succeeding Ben, working with the key international customers, and driving the business into sustained profitability for its customers, employees and shareholders," Mr. Combes said in a statement.

But Alcatel-Lucent's shares fell 1 percent in Paris trading following the announcement to €1.13. Aleksander Peterc, an analyst in London at Exane BNP Paribas, said investors had been hoping for an executive with more of a proven track record as a cost-cutter. Mr. Peterc said that Mr. Combes should quickly identify which businesses are for sale.

The company has indicated that its optical submarine cable business and its enterprise business of selling equipment to large companies and organizations, are both on the block, Mr. Peterc said.

"Alcatel-Lucent is in a crisis situation and even just identifying which businesses it intends to sell would be a step forward that could save thousands of jobs," Mr. Peterc said. "They have tried for six years since the merger and have spent €4 billion on restructuring to turn this company around and it hasn't worked yet."

Mr. Verwaaven, the former chief of the British operator BT, had integrated the Alcatel and Lucent product lines and organizations under a unified brand. When he announced on Feb. 7 that he would step down, he said in a conference call with analysts that the company was reviewing its entire business portfolio with an eye to possible asset sales.

In December, the company secured €1.62 billion in emergency financing from to buy more time. As a condition of the loans, the company pledged a percentage of revenues derived from future asset sales.

Martin Nilsson, an analyst at Handelsbanken in Stockholm, said that Mr. Combes would likely be forced to take major steps to expedite the resizing of the French company, including selling some businesses. The company employs only 12 percent of its work force, roughly 9,000 people, in France. The rest are spread around the world, mostly in the United States, China, India, the Netherlands, Japan and South Korea.

"I think irrespective of the C.E.O. they had chosen, this is the main challenge for Alcatel-Lucent at this time," Mr. Nilsson said. "It has been seemingly very difficult for this company to reach sustained profitability. That is a very hard for any company to maintain."

In another potential signal that Alcatel-Lucent may be entering a phase of greater reorganization, the company announced it had appointed Jean C. Monty, the former president and chief executive of Nortel Networks and of Bell Canada, as vice chairman of the board, a new position.

Philippe Camus, the Alcatel-Lucent chairman, said in a statement that Mr. Monty would be working closely with Mr. Combes to sort out the company's future.

"We are fortunate to have such an experienced colleague to support Michel Combes in his new role," Mr. Camus said. "I'm looking forward to working more closely with Jean and I'm convinced Alcatel-Lucent will benefit from his incredible knowledge of our business."

Mr. Nilsson said that Alcatel-Lucent's turnaround will not be easy. Selling money-losing businesses and cutting research and development spending to increase profit will also decrease Alcatel-Lucent's base of sales and could limit its future growth potential by slowing the development of new products.

"It is very easy for tech companies to get into a downward spiral," Mr. Nilsson said.

The company has declined to say which businesses it might sell. In 2012, sales of Alcatel-Lucent's optical networking and wireless networking businesses fell by 20.3 percent and 17.2 percent, respectively, from 2011. The company blamed the declines on the rapid transition by U.S. operators to faster network gear based on Long Term Evolution technology, which reduced demand for Alcatel-Lucent's second- and third-generation products.

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This article originally appeared in The New York Times.


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