Eighteen months into his three-year Shift Plan, Alcatel-Lucent CEO Michel Combes says the vendor is on target to turn cash-flow positive next year – a feat not achieved since 2006 – and that the company has re-positioned from generalist to specialist, focusing on IP networking, ultra-broadband access and cloud-based technologies.
European Communications caught up with Combes at Alcatel-Lucent’s annual Technology Symposium in New Jersey and asked him about Shift Plan targets, growth areas and the European Commission.
Eurocomms.com: As part of the Shift Plan you’ve set a target to cut fixed costs by €1 billion. You’re already two-thirds there, but where will other savings come from? More job cuts?
Michel Combes: Everything is on the table. In terms of job reductions, however, those have already been announced. In some countries there are usual and natural discussions with unions [about job cuts] but the big picture is agreed. You then have to agree on implementation country by country, but nobody has the slightest doubt we will not deliver. In fact, we are ahead of our plan on cost savings, which has allowed us to reinvest earlier in other areas.
Another Shift Plan target is €7 billion sales from core networking during 2015, yet revenue from this segment seems off the pace. How confident are you about top-line growth?
I spoke with investors [on 11 November] and gave them comfort that the €7 billion was clearly in reach. It comes from acceleration in our IP routing business, leveraging the fact we’re moving from edge to core, as well as into the data centre through Nuage Networks.
In IP transport we’ve also re-ignited growth, particularly from undersea cable where we have a €1.2 billion backlog [in orders].
On IP platforms we’ve had headwinds in the past two years because of legacy products going down, but two major ones – IMS driven by VoLTE, and Motive – will bring platforms back to positive growth. We’ve a clear roadmap to deliver the €7 billion.
You say the Shift Plan has moved into phase two and you are now looking to expand Alcatel-Lucent’s customer base beyond the telecoms sector. What progress are you making?
This is the heart of the new plan. First, I strongly believe we have the portfolio of products and services today which are relevant, not only for service providers but also for new types of customers.
Second, networks are back. Many industries need networks in order to deliver their own products and services. We are relevant to them and they are ready to invest.
Twelve months ago, probably our own economics didn’t allow us to move in those new spaces because we didn’t have any money to invest. Now we can invest again. We’re back in the race.
Which type of new customers are you targeting?
A natural segment is cable operators since they are very close to telcos. They come from the video world but are still migrating to full IP networks.
Webscale players, such as Facebook, Amazon, Microsoft – which have huge infrastructure, starting out from the data centre and rolling out elsewhere – are also starting to become our customers in specific areas, such as optical transport, undersea cable and broadband access.
We need to figure out, though, how we become more relevant to these guys in the data centre. We have to gain their confidence and trust.
Non service providers represent 7-8 per cent of our revenue today, so there’s clearly an opportunity for us to increase this share within our revenue mix.
You’ve been very vocal about what you see as an unfriendly environment for network investment in Europe. Are you encouraged by the arrival of Jean-Claude Juncker as the new president of the European Commission?
The previous commission failed. Europe is lagging behind the US on the one side and Asia on the other in terms of migrating to a digital world.
My expectation from having talks with [Juncker] before he became president is that he sees digital as one of the key areas in which to invest.
Nevertheless I want to keep up the pressure. I recently wrote a public letter asking the president a number of things.
First, we need a single market for the digital economy as scale matters. If the US is successful, or China is successful, it’s due to scale.
I’ve also asked for a strong investment programme in digital infrastructure, as well as cultural change in the regulatory framework. There needs to be less consumerism and short-termism and a clearer, long-term industrial vision.
I’ve called for a new deal in Europe around the digital economy, which I’ll fight for in the next weeks and months.
Have you taken Mobile Europe's 2014/15 survey? Click here to take part