A Talk With Alcatel's Serge Tchuruk

"Even as you restructure, the business changes every minute"

A year ago, losses were mounting at France's Alcatel Alsthom, and Pierre Suard, chairman of the giant telecom equipment maker, was forced out. His successor: Serge Tchuruk, former chairman of French energy company Total. Alcatel recently announced a $5 billion loss, the largest in French corporate history. A return to respectable profits is unlikely before 1998. Alcatel also lags in mobile phones, while its core switching business is under pressure. In an interview with BUSINESS WEEK, the 57-year-old Tchuruk explained his plans for the company.

Q: What did you find at Alcatel?

A: I found a company with a formidable presence throughout the world. The question was: What do you do with a company that has good technology, a global presence, but no profits?

Q: How bad was it?

A: I figured we could do the same business with $1.4 billion less in costs. The organization was too complex--there were 900 different companies. I have to cut the number in half. Some of these companies were empires in themselves. They were competing with each other.

Q: You also have decided to shed investments outside your business, such as your shares in Fiat?

A: Yes, the cross-holdings so common in Europe. They are meaningless. So we have decided to sell our stakes in Fiat and French bank CCF. The Peugot stake is already sold. We are also selling our stake in a mobile-phone service and a Swiss cable TV operation. All told, we are selling $2 billion in assets.

Q: A fundamental issue is reversing the sales decline.

A: A problem is that the level of investment by telecom operators is going down in Europe, as they clean up their balance sheets before the industry's deregulation in 1998. Transmission prices have also dropped dramatically. The only segment that is really strong is mobile-phone network equipment.

Q: Can you catch up with market leaders such as L.M. Ericsson and Motorola in mobile?

A: No, we cannot reach their level. Our market share in mobile is 10%. But we can bring it to 20%, which is the average worldwide share of all our products.

Q: Why are you interested in bidding for Thomson, the electronics and defense firm controlled by the French government? Analysts are wary.

A: Thomson is strong in areas like multimedia and digital decoders and satellites that are important to us. How could I not be interested?

Q: How do you view the breakup of AT&T into service and equipment arms? Is that a threat?

A: Well, the new AT&T, which has spun off its equipment business, may become a new customer for some of our data and voice transmission technology.

Q: How do you see the future of telecom and Alcatel?

A: As prices for fixed switching equipment continue to drop, our skills will shift to include more software as opposed to equipment. The market for transmission and access will surpass switching by the year 2000. Satellites will be important, too. Even as you restructure, the business changes every minute.

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