Telecommunication equipment provider, Alcatel-Lucent has announced its plan to cut 10,000 jobs in a cost cutting measure. That represents 14% of its total number of 72,000 employees worldwide. Alcatel-Lucent’s CEO Michel Combes says the decisions were “difficult”. but necessary in order to bring the company back into a positive position. The company has suffered loses in five straight quarters and hopes to save $1.4 billion dollars through 2015 with the announced cuts. The company has struggled since its inception when France’s Alcatel merged with US’s Lucent. At the time it was thought that the merged company would allow it to reduce costs by combining research and development costs along with cutting duplication in staff positions, leaving it leaner. But increased competition from companies like Ericsson and lower prices from China, rendered those cost cutting measures ineffective.
But Alcatel-Lucent has far greater problems than simply too many employees. The demise of almost all companies begins with the elimination of its work force. This is a simple, non-creative way of saving money. A company need not pay millions of dollars to a CEO like Combes, simply to pull the trigger on its workforce. Any graduate school student could make that call. Anyone owning shares, should consider abandoning ship as there is absolutely no reason to believe that these cuts will have any improved long time impact on the company’s bottom line. More importantly it needs to develop products and a long-term strategy to compete with business companies like China’s Huawei Technologies and Ericsson and that isn’t likely to happen. Last year the company lost $1.8 billion dollars.