“The company could disappear,” said Alcatel-Lucent CEO Michel Combes, not exactly the kind of wondrous hype CEOs normally sputter to bamboozle people into plowing their money into the company’s stock and drive up its price so that the executive stock options might finally be worth something.
It would be the end of Lucent, once the glorious AT&T Technologies which contained the storied research outfit Bell Labs, one of the powerhouses in US tech development, whose employees won 7 Novel Prizes. It was all part of almighty monopoly AT&T back in the day when Al Gore was still busy inventing the internet. Lucent was spun off and went public with huge fanfare in 1996, at the time the largest IPO ever, with the most Wall-Street hype ever. Then Lucent, with 165,000 employees, became a darling of a swarm of day-traders who sent its stock into the stratosphere, as was customary during the dotcom bubble.
The bad-hair days started on January 6, 2000, when Lucent announced that it would miss its earnings forecast. More misses and revelations of toxic accounting practices followed, revealing that the stock run-up had been based on Wall Street engineering beautified with unfettered executive hype and lies that day traders, who thought they’d never have to work again, and mutual stock-fund managers, who thought they knew everything, had bought lock, stock, and barrel. Years of layoffs and losses reduced it to a penny stock.
In 2006, Lucent merged with similarly positioned French crown jewel Alcatel, and in the eyes of the French, became a French company. The deal was made on the theory that you can take two nearly dead cats and make one live dog out of them.
The combination has lost money ever since, burned through untold billions of dollars and euros, laid off tens of thousands of people in huge waves around the world, and is currently going through its sixth turnaround plan. That would be about one per year. Each one was going to save the company once and for all.
Yet, it continues to shrivel out of sight while eating up investor money in the process. So CEO Combes, on the job since April, has to justify to the French parliament the latest decision to close sites and lay off 15,000 people worldwide, which would be fine, but 900 of them will be in France, and that’s not fine.
“I don’t plan on there being a 7th” restructuring plan, he told parliament’s economic affairs committee. “I’m convinced that we have a plan that is coherent, that is complete, that addresses all the problems the company is facing and can get it back on its feet.”
Sounds exactly like the stuff the folks before him had promised. The French government under François Hollande, who has become the most unpopular French president ever, is dogged not only by general disdain but also by sky-high unemployment. So it’s trying to show that it is doing something other than raising taxes and tightening the belts of the people. It passed laws to stop layoffs in their tracks. And CEOs who want to lay off people in France are put publicly through the wringer.
But there is reality. “The plan sets targets that are key to the survival of the company,” Combes said. Which is precisely what all prior plans had targeted too. It kicked off the obligatory negotiations with the French government and much posturing and demonstrations by the unions, and they might even occupy a few sites and take one or two executives hostage, a common negotiating tactic. It’s what he called “the social talks.” And he warned that they’d have to be completed in four months.
Nope, this dog is dead. The restructuring will lead to more losses and layoffs. In the process, the company is getting carved up and distributed to the circling hyenas. And that would be the end of a two-decade long convoluted saga of ingenious Wall Street engineering and fee extraction combined with tons of executive short-term wisdom and brilliant strategic thinking on both sides of the Atlantic. Along the way, millions of people lost their shirts (often without knowing it because the stock had remained hidden in their retirement funds all the way down).
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