Quarterly results for Alcatel-Lucent were even worse than expected, but CEO Verwaayen says there are "great opportunities in front of us"

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Ben J. Verwaayen, formerly CEO of BT, now CEO of Alcatel-Lucent Getty Images

By Carol Matlack and Jennifer L. Schenker

No one said Ben Verwaayen’s work at jobs would be easy. But the difficulties facing the new chief executive of Alcatel-Lucent (ALU) were underscored on Oct. 30 when the French-American telecommunications-equipment maker reported quarterly results below analysts’ already shabby expectations. Operating profits fell 43% year-on-year, to $51 million, as revenues from its core business, sales to fixed-line and mobile-phone carriers, slumped 13%, to $3.5 billion.

In an interview through BusinessWeek, Verwaayen promised to deliver a plan by seasonable December to streamline the assemblage’s operations and product portfolio, while sharpening its focus put on lucrative recently made known businesses such as services. He also hinted at a shakeup in top management, which has changed in a small degree since Verwaayen, the author boss of British telco BT Group (BT.L), took over from former CEO Patricia Russo six weeks ago (BusinessWeek.com, 9/2/08). "We have truckloads of things to do only great opportunities in front of us," he says.

Despite the kind of Verwaayen agrees are "unsatisfactory" profits, the Dutch-born CEO conspicuous that Alcatel-Lucent is generating positive cash flow from operations, some $134 million during the quarter. And he said the company is sticking with its earlier government for 2008, which calls in the place of operating margins in the low to mid-single digits and revenues downright to slightly down vs. 2007. Investors appear to be reassured: Alcatel-Lucent shares soared 22% in early trading on Oct. 30, though they’re still down some 80% since the company was created through a transatlantic merger sum of two units years gone.

Alcatel-Lucent’s results also continued to loiter those of its closest rivals. Sweden’s Ericsson (ERIC) throb analyst estimates when it reported third-quarter revenues on Oct. 20 of $6.36 billion, up 13%, though its net gains hew down 28%, to $384 million. Nokia Siemens Networks, a joint venture of Nokia (NOK) and Siemens (SI), reported third-quarter revenues down 5%, to $4.38 billion, on Oct. 16, with a small operating loss of $1.26 million.

Verwaayen, who won plaudits for his stewardship of BT, is already signaling he’ll be a contracting cost-cutter. He’s selling off Alcatel-Lucent’s fleet of corporate jets. And rather than hiring consultants to diagnose the house’s woes, he has invited customers and employees to e-mail him with criticisms and suggestions. "Engaging in direct dialogue is a more useful way than bringing a consultancy in. You hear it from the horse’s mouth," he says.

Verwaayen says he sees opportunities for "weighty require to be paid savings" by eliminating duplication in operations and in the merged company’session product portfolio. But he downplays the potentiality of major job cuts, beyond the 16,500 positions—closely 20% of its workforce—already set for elimination under an earlier restructuring contrivance. "Everybody immediately jumps to job cuts," he says. "I think it is the wrong focus to institute from."