Alcatel-Lucent – Making a Positive Move

I would not call this too little too late. I slammed the company not too long ago for not taking positive steps towards positioning itself for the next generation of wireless. I applaud them for establishing a joint venture Japan-based NEC Corp. to pool research-and-development resources to develop an advanced mobile-broadband technology known as Long Term Evolution, or LTE. LTE is a 3GPP project towards what we can be called 4G. Some call LTE, 4G and not Pre-4G.

The write down speaks to the almost valueless merger of Alcatel-Lucent. The company is being pushed by investment bankers to sell the wireless division for cash. The wireless division has become a cost center for Alcatel-Lucent. However, the rising operating costs for this division has as much to do with unexciting product lines as it has to do with a newly depressed economic environment and a 2-year-old carrier capital constrained environment. If they sell their wireless division, Alcatel-Lucent will not survive as a major infrastructure vendor.

Alcatel-Lucent is undergoing a restructuring. The easy way out for investment bankers and creditors is to force the company to sell off the units generating the largest costs and the lowest revenues. I wish the merger never happened. In the beginning I saw it as an opportunity for Alcatel to get into wireless in an aggressive way and for Lucent to enter Europe in as just an aggressive manner. However, what took place is text-book case for merger integration failure.

To date the companies have never been able to develop a coherent product development or marketing philosophy. The companies are completely culturally incompatible. I have said this before; Lucent should have merged with Motorola.

Alcatel-Lucent’s venture with NEC is an indication of a strong willingness to make positive and aggressive changes. If Russo is truly behind the changes, maybe she ought to stay. However, the jury is still out on Russo. I give her credit for all she has done but can she keep leading the charge without burning herself out?