Alcatel-Lucent Names Chief to Lead a Major Downsizing

BERLIN — Alcatel-Lucent, the struggling French telecommunications equipment maker, on Friday hired a former Vodafone and France Télécom executive, Michel Combes, to lead the company through what might be a major downsizing.

Mr. Combes, 51, will take over for Ben Verwaayen, who had failed in four years to bring the equipment maker, created by the 2006 merger of Alcatel of France and Lucent Technologies of New Jersey, to sustained profit.

Mr. Combes left Vodafone last summer after agreeing to take over as chief executive of SFR, a French mobile operator owned by Vivendi. But he withdrew from the job after the sudden departure of Jean-Bernard Lévy as Vivendi’s chief executive.

In brief remarks to senior executives this morning in Paris, Mr. Combes said he planned to conduct a “listening tour” of employees, shareholders and other stakeholders before formulating a strategy for Alcatel-Lucent, which lost 1.4 billion euros ($1.9 billion) in 2012.

The company is in the midst of cutting 7 percent of its global work force, 5,500 of 76,000 jobs, by the end of this year.

In a statement, Mr. Combes said he would work to return Alcatel-Lucent to lasting profitability, something that has eluded it since the trans-Atlantic merger.

“This is a company I know well,” he said in a statement, “and I look forward to succeeding Ben, working with the key international customers and driving the business into sustained profitability for its customers, employees and shareholders.”

Alcatel-Lucent’s shares fell 1.8 percent, to 1.12 euros, in Paris trading after the announcement. Alexander Peterc, an analyst at Exane BNP Paribas in London, said investors had hoped for an executive with more of a track record as a cost-cutter. He said that Mr. Combes should quickly identify which businesses were for sale.

The company has indicated that its optical submarine cable business and its enterprise business of selling equipment to large companies and organizations are on the block, Mr. Peterc said.

“Alcatel-Lucent is in a crisis situation, and even just identifying which businesses it intends to sell would be a step forward that could save thousands of jobs,” Mr. Peterc said. “They have tried for six years since the merger and have spent 4 billion euros on restructuring to turn this company around, and it hasn’t worked yet.”

Mr. Verwaayen, the former chief of the British telecom operator BT, integrated the Alcatel and Lucent product lines and organizations under a unified brand. When he announced on Feb. 7 that he would step down, he said in a call with analysts that the company was reviewing its entire business portfolio with an eye to possible asset sales.

In December, the company secured 1.62 billion euros in emergency financing from Credit Suisse and Goldman Sachs to buy more time. As a condition of the loans, the company pledged a percentage of revenue derived from future asset sales.

Martin Nilsson, an analyst at Handelsbanken in Stockholm, said Mr. Combes would most likely be forced to take major steps to expedite the resizing of Alcatel-Lucent, including selling some businesses. Only 12 percent of the company’s work force, roughly 9,000 people, is in France. The rest are spread around the world, mostly in the United States, China, India, the Netherlands, Japan and South Korea.

“I think irrespective of the C.E.O. they had chosen, this is the main challenge for Alcatel-Lucent at this time,” Mr. Nilsson said. “It has been seemingly very difficult for this company to reach sustained profitability.”

In another potential signal that Alcatel-Lucent may be entering a phase of greater reorganization, the company announced that it had appointed Jean C. Monty, the former president and chief executive of Nortel Networks and Bell Canada, vice chairman of the board, a new position.

Philippe Camus, the Alcatel-Lucent chairman, said in a statement that Mr. Monty would be working closely with Mr. Combes to sort out the company’s future.

“We are fortunate to have such an experienced colleague to support Michel Combes in his new role,” Mr. Camus said. “I’m looking forward to working more closely with Jean, and I’m convinced Alcatel-Lucent will benefit from his incredible knowledge of our business.”

Mr. Nilsson said that Alcatel-Lucent’s turnaround would not be easy. Selling money-losing businesses and cutting research and development spending to increase profit will decrease Alcatel-Lucent’s base of sales and could limit its future growth potential by slowing the development of new products.

“It is very easy for tech companies to get into a downward spiral,” Mr. Nilsson said.

Alcatel-Lucent has declined to say which businesses it might sell. In 2012, sales fell more than 20 percent in its optical networking business and 17 percent in wireless networking. It blamed the lower sales on the rapid transition by United States operators to faster network gear based on Long Term Evolution technology, which reduced demand for Alcatel-Lucent’s second- and third-generation products.

This article has been revised to reflect the following correction:

Correction: February 22, 2013

An earlier version of this article misspelled, in one reference, the last name of the departing Alcatel-Lucent chief executive. He is Ben Verwaayen, not Verwaaven. It also misspelled the given name of an Exane BNP Paribas analyst. He is Alexander Peterc, not Aleksander. Additionally, an earlier summary for the article misstated the size of Alcatel-Lucent’s loss in 2012. It was 1.4 billion euros, not 1.4 euros.

Alcatel-Lucent to Cut 5,000 Jobs After Quarterly Loss

The company, created in the 2006 merger of Alcatel of France and Lucent Technologies of the United States, announced the job cuts as it reported a 254 million euro, or $312 million, loss for the second quarter.

Its sales fell 7.1 percent from the period a year ago, to 3.55 billion euros.

Ben Verwaayen, Alcatel-Lucent’s chief executive, described the cuts as necessary because of weaker demand for network equipment and rising competition from lower-cost rivals. The cuts, Mr. Verwaayen said, would be made by the end of 2013 in all parts of the company except research and development.

“It is clear from the deteriorating macro environment and the competitive pricing environment in certain regions challenging profitability that we must embark on a more aggressive transformation,” he said.

Martin Nilsson, an analyst at Handelsbanken, a bank in Stockholm, said Alcatel-Lucent was feeling the effects of declining demand in North America, its biggest market, for network gear that runs on the code division multiple access, or C.D.M.A., standard, which is being phased out by Verizon Wireless, the market leader in the United States.

Alcatel-Lucent’s revenue from North America, which accounted for 39 percent of its sales, fell 8.3 percent in the quarter, to 1.4 billion euros.

“The whole sector has been weak, but Alcatel-Lucent has the most vulnerable position,” Mr. Nilsson said. “The C.D.M.A. business is disappearing and the company in wireless equipment doesn’t really have much of a major presence outside the U.S. market.”

Mr. Verwaayen said the job cuts were part of a plan to prepare the company for slower growth in markets worldwide, which has pushed some of the company’s competitors, like Nokia Siemens Networks and Ericsson, to cut jobs or report losses.

In a conference call with analysts, Mr. Verwaayen said he would review all facets of Alcatel-Lucent’s operations with an eye to abandoning unprofitable geographic markets and product and service lines.

In managed services, an outsourcing business in which Alcatel-Lucent runs part or all of the grids for network operators, Alcatel-Lucent will look to renegotiate or cancel about a quarter of its contracts around the world, he added.

While the company declined to specify where the jobs would be cut, Mr. Verwaayen said the reductions would fall across the global organization of 76,000 workers, even in France, its home base, where the Socialist government is trying to prevent further job losses.

“We have a pretty good track record of being stubborn and going through the process in every single jurisdiction that we’re in,” Mr. Verwaayen said. “We will have this program signed, sealed and delivered by the end of 2013.”

Shares of Alcatel-Lucent closed down 6 percent in Paris.

To increase revenue, Mr. Verwaayen said Alcatel-Lucent would create a separate business division to manage the company’s 44,000 telecommunications patents, of which 29,000 were developed at Lucent’s Bell Labs.

The company posted 140 million euros in licensing revenue in 2011 from the portfolio, which the chief financial officer, Paul Tufano, described as “weak” compared with its rivals.