Alcatel-Lucent Technology Symposium: Does Chapter 2 of the Shift Plan Swap Pillars Before the Previous Ones Are Set in Stone?

Peter Jarich
Peter Jarich

Summary Bullets:

  • Alcatel-Lucent’s CEO kicked off the vendor’s annual tech conference by detailing proof points that the company has succeeded in the first phase of its Shift Plan.
  • While outlining key aspects of the next phase, the fact that the vendor does not expect to be cash-flow positive until 2015 means that it might not be ready to raise the “Mission Accomplished” banner on Phase 1.

Alcatel-Lucent kicked off its annual Technology Symposium, held in the shadows of its famed Bell Labs campus on November 11-13, by welcoming everyone to the “beautiful woods of New Jersey.” In fact, the woods of New Jersey are picturesque this time of year, and Alcatel-Lucent’s executive team showed up to the event properly dressed for a brisk walk through nature. Jeans, sweaters and sports coats replaced tailored suits as the as attire du jour for most of the vendor’s top brass as each took turns highlighting how the company has come through the proverbial woods with respect to first phase of its save-the-company “Shift Plan” announced in 2013. Among the highlights, neatly illustrated (but amateurishly photographed) below by an artist commissioned to summarize the various sessions, were the standard anecdotes of success followed by a vison statement for the next phase of the company’s journey:

ALU Tech Symposium
Source: dpict, Alcatel-Lucent

For those that are not visual learners, the picture describes the essence of Mr. Combes’ keynote talk, which recapped the vendor’s decision to refocus its direction on ultra-broadband, IP and cloud. In support of this decision, he provided details on cost cuts, R&D and procurement restructuring, as well as debt restructuring, and noted a dozen wins (YTD 2014) for Nuage Networks. He then went on to unveil the main pillars of what will be the next chapter of the Shift Plan.

Those pillars will be: Innovation (think small cells, Network 2020 vision, etc.), Transformation (i.e., changing the way Alcatel-Lucent thinks and works) and Growth (think, well, more customers and more money). He also pointed out that company morale is higher than it has been in years. Truth be told, I think it should be… if only because these three new pillars those sound like a helluva lot more fun than the previous chapter’s pillars (Restructure, Refocus and Refinance).

Before we call Chapter 1 done and dusted, however, there is one aspect of this plan that still needs to firm up: cash flow. Without a doubt, innovating, transforming and growing is going to take some cash. In his talk, Combes indicated that Alcatel-Lucent will be cash-flow positive by the end of FY 2015. While we’re almost to calendar year 2015, the end of fiscal year 2015 still seems a ways off. For a company that, per Combes, has not been cash-flow positive since 2006, the picture painted by all that green and black ink above cannot be taken for granted.

Sure, throughout the remainder of the conference, Alcatel-Lucent gave analysts lots of reasons to think it can pull off what it is planning. We’ll be posting several more blog posts and Advisory Reports with our analysis of those details. But, at its highest levels – I’ll call it the “Storyboard” view – let’s hope that Alcatel-Lucent is not replacing the pillars of its Shift Plan before the foundation is fully set.

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