Here we go again.
A little more than a month after reporting its first quarterly loss in more than a year (and it was a biggie -- $322 million in the red), Alcatel-Lucent
The centerpiece: Getting rid of several of the people who got Alcatel in this fine mess in the first place. According to the company, Alcatel will cut its executive team in half, introducing a "streamlined" executive committee of just six members. But the six execs getting the boot won't be alone. Alcatel also intends to lay off 5,000 employees as it restructures itself along the lines of four main global businesses -- all part of a plan to shave about $1.6 billion off of its operating budget by the end of next year.
Life is hard
Success is far from certain, and even management sounds unsure of itself. When reporting its loss back in July, CEO Ben Verwaayen declined to affirm his previous promise to exceed last year's 3.9% operating profit margin, or even to earn any profit at all this year.
But Alcatel isn't alone in its difficulties. As Europe cuts back on telecom infrastructure spending, competitors like Ericsson
So what will it take to get Alcatel back on track? Cutting costs is a good start, but with Europe in a slump, what Alcatel really needs is for U.S. telecoms to start buying more of its stuff. With the introduction of an LTE iPhone, you might think that's likely. But in fact, Verizon
It's not surprising that Alcatel has lost 93% of its market cap since merging with Lucent six years ago. There's little hope that Alcatel -- free cash flow negative for all six of those years -- will improve quickly.
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