Alcatel Chief Says Plans Are Ready to Help Exit Strategy Crisis

Alcatel-Lucent SA’s Michel Combes, who took over as chief executive officer on April 1, said he’s drafted an operational plan for the network equipment vendor and picked the management team to execute it.

Combes, who will detail the strategic road map on June 19, plans to stem cash consumption to let the company invest more in innovation, he said today at a telecommunications conference organized by French daily newspaper Les Echos.

“For two months now, I’ve been at in Alcatel-Lucent offices all day, every day,” Combes said. “This company definitely knows innovation, and it has strong relationships with its clients. The real problem is that the financial situation isn’t sustainable. We need to generate cash.”

Taking the reins after predecessor Ben Verwaayen’s asset sales and firings failed to achieve a turnaround, Combes last month said Alcatel-Lucent will use divestments and partnerships to help stem losses. The company’s consumed an average 700 million euros ($934 million) of cash annually since its creation with the 2006 merger of Alcatel SA and Lucent Technologies.

Shares of Alcatel-Lucent closed today unchanged at 1.36 euros in Paris. They’ve have gained almost 36 percent this year.

Before taking the post at Alcatel, the 51-year-old Frenchman was due to take over Vivendi SA’s SFR phone unit last year and didn’t proceed with the move. Combes joined from Vodafone Group Plc, where he’d been recruited by Vittorio Colao when he took over as CEO in 2008, and had previously held positions at France Telecom SA and French mobile-phone tower company TDF.

Facing Crisis

“Alcatel-Lucent is facing a strategy, operational and financial crisis,” Combes said. “I’ve been faced with similar situations in my career. It’s diagnosis first, then choosing people internally and externally to help bring confidence back and put things into motion.”

At Vodafone, Combes oversaw a 2 billion-pound ($3 billion) cost-cutting program, reducing headcount and lowering spending on network gear and logistics.

In his first address to investors last month, Combes said Alcatel-Lucent could emulate Ericsson AB, which a decade ago focused on mobile equipment and reorganized its workforce to expand the Swedish company into the world’s largest vendor of wireless networks. He will face intense competition from the likes of China’s Huawei Technologies Co. and ZTE Corp., which have taken market share from European competitors, falling short only in the U.S., where security concerns prevent them from winning major network contracts.

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