Innovation rather than "financial tricks" key to Alcatel-Lucent's future, CEO says

Wednesday, May 23, 2012

Alcatel-Lucent's (NYSE: ALU) CEO Ben Vervaayen set out to dispel any doubts about the company's ability to compete, saying it will not divest assets, sell patents or reduce prices but compete through innovation.

Speaking at Alcatel's Technology Symposium being held in Santa Clara, California, this week, Vervaayen said that the company cannot ignore the volatility in global markets, particularly in Europe.

Globally, the company posted a 12.3% decline in revenues to 3.21bn euros (US$4.24bn) in the first quarter of 2012, compared to the same quarter last year.

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That said, the executive said he is "bullish" on Latin America, which saw 26% growth in the quarter for the company.

The executive said the company's strategy is long term and cannot be appreciated on a quarterly basis.

This week, the company announced it plans to enter the US$4bn-a-year market for internet core routers, bringing it into direct competition with Cisco Systems (Nasdaq: CSCO) and Juniper Networks (Nasdaq: JNPR).

"You have to be first out of the blocks. In price we are not the best suited player. We need to be a true innovation company. You need to go out with solutions. Go to the market as early as possible. It's not just about the product, but the capability to execute," Vervaayen said.

The executive said the company is not seeking 100% market share, and that a 10-15% market share is "enough."

"But to get there you need to change the dynamic. We're not a 'me too' company. We believe we have the ability to differentiate. That has to become a habit," he said.

The company's margins are high in its software area the executive said, adding that ALU is competing strongly with the Chinese in their own market in fixed-line access.

Vervaayen admitted the company has been "subscale" in wireless, but said it is now in pole position to challenge market leaders with its small cells technology, known as Light Radio.

While the company is engaged in cost cutting programs in France, selling assets is not an option, he noted, referring to a question about the viability of its Bell Labs R&D unit and the sale last year of call center and IP solutions specialist Genesys.

"Financial tricks will not save the company at the end of the day, but helping your customers will. This is a pivotal moment in the industry," the CEO said.

"Bell Labs is alive and kicking. It is a key asset. We have 2,000 important patents. We're looking at ways of creating and sharing that with the market."