The move follows an announcement earlier this month that Alcatel would miss its 2012 profit margin target.
Also included in the reduction strategy announcement are measures to exit or restructure unprofitable managed services contracts, exit or restructure in unprofitable markets, and manage the company’s patent portfolio as an independent profit centre.
“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. We are therefore launching today The Performance Program to accelerate our transformation and reduce costs by €1.25 billion by the end of next year in order to keep ahead of market realities. These times demand firm actions,” said Ben Verwaayen, CEO of Alcatel-Lucent.
Alcatel’s shares fell by 8% in morning trading, having already dropped a fifth following July 17’s profit warning.
The announcement came as part of Alcatel-Lucent’s second quarter financial results in which the company reported a second quarter net loss of €254 million on revenues of €3.5 billion, which was up 7.1% year-on-year. Operating cash flow experienced a loss of €184 million, meaning a net cash position of €236 million at the end of June.
The vendor also experienced double digit declines in business in its core markets of North America, Asia-Pacific and Europe, but performed better in Central and Latin America and CEE.
