* Layoffs, patent strategy on board agenda
* Alcatel has met with investment bankers on options
* No major asset sales seen in short term
* Chairman to meet with French Industry Minister on job cuts
By Nadia Damouni and Leila Abboud
NEW YORK/PARIS, Sept 5 Alcatel-Lucent
will hash out details of its latest restructuring plan at a
board meeting expected next week, three sources close to the
matter said, after a loss-making quarter exposed the telecom
equipment maker's perennial fragility.
The meeting follows months of intense review of the business
led by Chief Executive Ben Verwaayen, who enters his fourth year
at the helm still trying to squeeze steady profit and cash
generation from the company formed in a 2006 merger.
The agenda will include where to lay off 5,000 workers, a
particularly touchy topic in France, and how to make more money
from 29,000 patents after an initial project with licensing
specialist RPX Corporation fell short of expectations,
the sources said.
Alcatel-Lucent has also been consulting investment bankers
since early summer to assess its options, including asset sales,
although it has not hired a bank to help it, the sources said.
No significant asset sales are expected in the short term
since the company's slumping share price and the sector's poor
outlook have undercut the value of its units, sources said.
"The board meeting will review the initial findings from the
review of the operations and the organizational structure," said
one of the sources.
"They realize this is long overdue particularly now that
[competitor Nokia Siemens Networks] did a big move with their
restructuring. They realize they need to be much more aggressive
about adjusting their cost structure."
Under Verwaayen's tenure, the company has radically pared
back its product offerings, launched strong mobile broadband
technologies and cut 1 billion euros of costs, prompting a
six-month long share rally last year.
The optimism was cut short when Alcatel-Lucent faltered late
last year amid cutbacks in network equipment spending by
telecoms operators, particularly in austerity-hit Europe, which
have also hurt larger rivals Sweden's Ericsson,
China's Huawei, and Nokia Siemens Networks (NSN).
Alcatel-Lucent's market capitalisation has shriveled to
roughly 2 billion euros, down 93 percent from pre-merger levels.
They traded at all-time lows of 0.86 euros per share on Tuesday.
Verwaayen announced a fresh downsizing shift in July that
included 1.25 billion euros ($1.57 billion) in cost cuts by
exiting unprofitable markets and contracts, and shedding 5,000
jobs, or nearly 7 percent of the workforce.
Analysts have warned the plan may not go far enough to solve
the group's structural challenges of being smaller than rivals,
offering too many products and burning too much cash.
Alcatel-Lucent's plan is smaller in scope than the
restructuring ongoing at NSN, which includes firing 17,000
people, a quarter of its staff, and selling off multiple product
lines to focus on mobile broadband.
Alcatel-Lucent declined to comment.
The company has not yet said where the job cuts will be made
in the 130 countries where it operates, but said its 26,000 R&D
staff will be protected and layers of managers eliminated.
Unions in France, where 9,500 or 12.5 percent of the
76,000-strong workforce is located, are alarmed and met a junior
minister on Monday to seek help from newly elected Socialist
President Francois Hollande.
The government is already struggling to minimize planned
layoffs at other crisis-hit companies like Peugeot and
Alcatel-Lucent Chairman Philippe Camus will meet France's
Industry Ministry Arnaud Montebourg on Thursday.
Sources said that sites would be closed and less-important
countries see staff eliminated or go down to a single person.
"Over time grew to have an in-country presence in
130 countries but the reality of the telecom world is 80 percent
of the spending is in the top 20 to 25 accounts," one of the
As it works on cost cutting, Alcatel-Lucent has been in
talks with its lenders on refinancing options. The company is
sitting on a cash pile of 2.9 billion euros but has 4.85 billion
in debt outstanding in bonds and loans.
In April, part of Alcatel's 1.4 billion euros five-year
revolving bank credit facility expired, leaving it with the
remainder of 837 million euros.
While Alcatel-Lucent said it is still in talks with banks
regarding a future revolving credit facility, sources said a
number of banks have been reluctant to lend due to the
uncertainty around the company.
One option that could create liquidity and has worked for
others in the industry, including bankrupt gear maker Nortel
Networks and wireless portfolio company InterDigital
Inc, would be to better monetize intellectual property.
In February, Alcatel-Lucent signed a deal with licensing
specialist RPX Corporation, which analysts had hoped would
generate up to a billion euros in revenue from patents in fixed
and mobile communications, semiconductors and consumer
Under the deal, RPX markets Alcatel-Lucent's patents to its
roughly 50 members, which include companies like Google Inc
and Intel Corp. But Alcatel-Lucent has not
provided details on how much it will earn from the licensing.
"So far, the deal has not given Alcatel-Lucent what they
were expecting in terms of revenue," one of the sources said.
"They are going to revisit something around this; they will
do it in a different form," the source said, adding that how to
monetize the patents is still under discussion by the board.