Alcatel-Lucent cuts hard to reverse losses

Alcatel-Lucent’s ambitions to be a major player in the multiscreen video ecosystem are being scaled back as part of a cost cutting strategy to tackle growing losses.

The Paris-based company has struggled ever since its formation in 2006 from the merger between telecoms group Alcatel SA of France, and Lucent, which inherited the famous Bell Laboratories of the U.S. Since then, Alcatel-Lucent has attempted to move into new markets that exploit its technology base in telephony, including pay TV and broadcasting. This culminated in the launch of its Multiscreen Video Platform in 2011 to compete with Cisco’s Videoscape, and Ericsson’s Multiscreen TV Solution in the emerging market for one stop shop TV Everywhere packages.

But, Alcatel Lucent has now announced that it is focusing back on its core markets in IP and fiber optics, along with wireless networks, as part of a drastic plan to stem the tide of losses. The company just posted a net loss of €254 million ($320 million) for the second quarter on revenues of €3.545 billion.

The new plan, called the Performance Program, has a target of shaving €1.25 billion in costs, largely through cutting 5,000 jobs, mostly in non-core areas, by the end of 2013. As part of the plan, Alcatel-Lucent is reshuffling its management team and reorganizing its business around four core areas: core networks focused on IP and optics, fixed networks, wireless and platforms.

The last of these will embrace the multiscreen activities, but Alcatel-Lucent seems more focused now on its CDN business under the Velocix brand, which the company promoted strongly at the recent IBC 2012. This follows some notable successes in the CDN field following its entry through the acquisition of Velocix in 2009, with customers in the video arena including Verizon, Time Warner and Sky. This has usually been for multiscreen services, enabling IP delivery to PCs, tablets and other devices outside the home. For MSOs such as Time Warner, the Velocix CDN enables services to extend beyond the existing footprint so that subscribers can access their content over the whole country.

Alcatel-Lucent has been working to extend Velocix beyond basic video transport into cloud services that exploit the ability to capture information about streamed video flowing through the platform. One of its customers, the New Zealand Internet Services Provider Orcon, is using its AppGlide Online Video Analytics solution to analyze the performance of its CDN based on Velocix. Orcon says this has enabled it to improve quality-of-service to its end customers, and at the same time reduce the content streaming costs.

This highlights the potential for Velocix to help claw back some of Alcatel-Lucent’s lost revenues by tapping into the emerging market for cloud services and possibly “Big Data” analytics.