Last week, Alcatel-Lucent announced a new CEO, Michel Combes, to be effective on April 2nd. Indeed, as the press coverage has highlighted, Mr. Combes will have plenty of challenges in this job. But ALU is in need of someone like Michel, that’s for certain. It turns out I once had a call with Michel, when he was the recently named leader of Vodafone across Europe, and we in ALU were trying to figure how best to position our Services offers. At the time Vodafone was struggling with its operational model of having each country build and run independent networks and local operations staff, with a fairly thin set of marketing, network roaming assets, and supplier relationships as the only things in common across these different entities. I was the chief architect for the ALU Professional Services division and this meeting was arranged by our sales team with just the three of us on the call. The goal was to figure out a path forward to help Michel to transform Vodafone to be a more centralized operation, and able to leverage much more from common investments in the future. I don’t remember that much about Michel, or much of what we talked about. I just remember being frustrated afterwards that we had little hope of making progress with Vodafone at that time.
Michel’s new challenges are not that much different from back then. Elsewhere there is plenty of coverage and comment about ALU’s cash flow challenges. And the financial markets didn’t particularly like his announcement (ALU dropped 5% relative to the NASDAQ on Friday). Yet, I think it’s good they are hiring someone with a French background and political savvy. As when he was CFO at France Telecom, Michel will need that when it comes to figuring out how to work through the governmental/regulatory and social challenges of ALU’s French and European workforce. I also think Michel needs to re-assess the value and direction of the Services business within the company’s portfolio. Nokia-Siemens reported that about half their 2012 revenues are from Services. Ericsson grew their global Services business by 16% in 2012 to be nearly 45% of their total revenues. Even within ALU, Services has been the second most reliable business for revenue growth (with the IP division leading) and the best business group percentage operating income in 2012 (though still not the >30% it needs to be). Yet in the re-organization effective this past January, ALU’s independent Services unit was disbanded and mostly melded into each of the product units. Yesterday at MWC, the CEO of NSN certainly slapped down his gauntlet in challenge too.
I wish Michel Combes the best of luck with these challenges, and I hope he can find a path to financial recovery and a successful Alcatel-Lucent. In the meantime though, I will explore my own separate path forward as an independent services professional… Wish me luck!