8/3/2019 Lucent Case Strategy

1/18

LUCENTCASESTRATEGY

8/3/2019 Lucent Case Strategy

2/18

COMPANYPROFILE

LUCENTtechnologieswasatechnologycompanycomposedofwhatwasformerlyAT&TTechnologies,whichincludedWesternElectricandBellLabs.ItwasspunofffromAT&TonSeptember30,1996.lucentmergedwithAlcatelSAofFrancetoformALCATEL-LUCENTonDecember1,2006.

AtthetimeofitsspinoffLucentwasplacedunder

leadershipofHenrySchacht,whowasbroughtintooverseeitstransitionfromanarmofAT&Tintoanindependentcorporation.RichardMcGinnsucceededSchachtasCEOin1997.

8/3/2019 Lucent Case Strategy

3/18

Contd.

.

Lucentbecameadarlingofstockmarketinlate1990srisingfromsplitadjustedspinoffpriceof$7

$84/share.HoweveronJanuary,6,2000lucentmadefirstofastringofannouncementsthatithadmisseditsquarterlyestimatesandlateritwasrevealedthatit

haduseddubiousaccountingpracticestogeneratesomeofitsearlyquarterlynumbers.ByOctober2002,whenitsstockpricebottomedat55centspershareHenrySchachthadbeenbroughtbackonaninterimbasistoreplaceMcGinn.

8/3/2019 Lucent Case Strategy

4/18

Contd

In2002,lucentbeganmakingsignificantcutstothehealthcareandretirementbenefitsof

manyofits125000retires.Althoughlucentcontendstheseandfuturecutsarenecessaryforitssurvival,theyhaveneverthlessspawnedseverallawsuitsandgeneratedacontinuingflowofnegativepublicityinmedia.Tpdaylucenthas30500employees,downfromabout165000employeesatitszenith.

8/3/2019 Lucent Case Strategy

5/18

Contd..

Lucentisactiveinareasoftelephoneswitching,optical,data,andwirelessnetworking.

OnApril2,2006lucentannouncedamergeragreementwithAlcatel,whichis1.5timesthesizeoflucent.MsRussoservedasCEOof

newlymergedcompany,Alcatel-Lucent,untilshewasoustedin2008.

8/3/2019 Lucent Case Strategy

6/18

CASESUMMARY

LucenttechnologieswasanentitythatspunofffromTelcogiantAT&T.

Lucentbecameamajorplayerinmanybusinessesviamobility,data,OPTICAL,ANDVOICENETWORKINGTECHNOLOGIES,professionalnetworkdesignsandconsultingservices,webbasedenterprises,solutionsthatlinkedpublicandprivatenetworksandoptoelectronicsandsemiconductors,.

8/3/2019 Lucent Case Strategy

7/18

Contd. In 1996 due to growing popularity of internet there washuge demand for more than one product line whichboosted Lucents sales.(talk about capture of market ofnortel and moto. etc) However in late 1990s data traffic business started togrow rapidly but Lucent didnt recognize this andcontinued with its main competencies i.e. telecomequipment and voice based technologies. WhereasNortel and Cisco recognized the potential of internetand invested aggressively in data traffic business.

8/3/2019 Lucent Case Strategy

8/18

Contd. Thoughlucentinvestedinfewinternetandwirelesscompaniesafter1996buttheirfocuswasstillontheircorecompetencies.

In1999lucentdecidedtorestructureitsoperationsbydividingthemselvesinto4keybusinessesserviceprovidersnetworks,netcoreprofessionalservices,enterprisenetworksandmicroelectronicsandcommunicationtechnologies.

Bylate1999lucentwasingreattroubleastheirhighpricedacquisitionswerenotearningprofitsandcompanywasunabletointegrateoperationsofacquiredcompaniesleadingtoproblemsoncorporateculturefront.

8/3/2019 Lucent Case Strategy

9/18

Contd

Inearly2000lucenttookmanyinitiativestoincreaseitsresourcesandreducecapitalexpenditurestoimprovecashflowfromoperations.howeverjust

whenlucenthadincreaseditssalestostartinternetandphonecompaniesmanyofthemdefaultedonpaymentsastechnologyandtelecomindustryreeledunderanunprecentedslumpin2000whichtooklucentintoadeepfinancialcrisis.

AnalystsattributedlucentsbadperformancetowrongstrategiesandwronguseoffundsbycompanysCEOMcGinnhencehewasreplacedbySchachtastemporaryCEO.

Inearly2001lucentannounceda7ptrestructuring

plantoreviveco.frombankruptcy

8/3/2019 Lucent Case Strategy

10/18

CHALLENGESFACED!!!!!!!

Creditcrunchin2000duetolowsaleshighinventoryandmorecreditsalesworsened

thesituation. Mismatchbetweenitsownorganizationalcultureandcultureoforganizationsitacquiredwhichledtoexodusofmanygoodemployees.

Slumpoftelecomsectorin2000.

8/3/2019 Lucent Case Strategy

11/18

STRENGTHS:

Expansionactivitieswerecarriedoutvery

well.whenevertheyfoundScopeforacquisitionormergertheydid.

LikeacquisitionofOctelCommunicatins

corp.(1997),Livingtonenterprises(1997),prominentcorp(1998),ascendcommunication(1999),Chromatis

network(2000).

8/3/2019 Lucent Case Strategy

12/18

Contd.WEAKNESS Managementoflucentwasignorantforpast2yrsasitfailedtorealizethatthesalesofthecompanyaredecliningbutproductionwasgoingasperscheduleand

theywerealsoignorantregardingmorecreditsalesthancashsales.Thusthesefactorsledtoacreditcrunch.

Beforeacquiringthecompanieslucentdidntinvestigateproperlythetruevalueofthoseorganizations.As

accordingtomanyanalystslucentpaidmuchhighprice4thoseacquisitions..

8/3/2019 Lucent Case Strategy

13/18

Contd Secondlymanagementoflucentwasignoranttowardsthefactthatthe

organizationtheyareacquiringareintheirmaturitystagesandhadnocuttingedgetechnologiesintheirpipeline.

Anotherignoranceofmarketingdept.oflucentcomesfromthefactthatfromearly1990sinternaland

8/3/2019 Lucent Case Strategy

14/18

Contd..

wirelesssystemsbegangrowingandmanyofthecompetitorslikeCiscoandNortelwereinvestinginthesetechnologybutlucentdidntrealize

thatintimeandbythetimeitrealizedithadalreadylostahugechunkofmarketshare

8/3/2019 Lucent Case Strategy

15/18

Contd

Thebiggestoftheweaknessoflucentwasitsinabilitytointegratethecultureofacquiredcompanieswithitsowncompanywhichledto

restructuringinhumanresource.

8/3/2019 Lucent Case Strategy

16/18

ACTIONSTAKEN

GROWS().

SDPT() TIGERTEAM()

PMO()

GLOBALORGANISATIONALSTRUCTURE

8/3/2019 Lucent Case Strategy

17/18

8/3/2019 Lucent Case Strategy

18/18

RESULTS

Theactionstakenbylucenttechnologiesgavepositiveresultstothem.sinceyears2001and2002werebadfroalltelecomcompaniesduetoadversemarketconditionshencelucentreportedhugelossesofoverus$14.17andus$11.82bnforyrs2001and2002fromprofitsofmorethanus$1.43in2000.

Accordingtoreportslucentnotonlymetitscost

reductiontargetsofus$2bnperyr.butalsoexceededitstargets.

Henceinfiscalyear2003lucentreportedanetincomeofus$99mnforthefourthquarterendingsept.30as

comparedtolossofus$2.81bnforsameperiodin2003.