Alcatel-Lucent found its calling: supplying high-tech equipment for telecommunications networks. The company's core network products unit sells network switching and transmission systems for wireline and wireless networks, terrestrial and submarine optical systems, microwave radio products, and fixed-access gear. Its software and services division develops applications for IP television, digital payment, messaging, and mobile communications, while services range from application and systems integration to managed services and maintenance. Alcatel-Lucent's enterprise division provides corporate and government clients with unified communications systems, data networking gear, and contact center systems.
Alcatel-Lucent has undergone extensive integration and restructuring efforts since its formation in 2006, when Alcatel and Lucent Technologies merged. The company has struggled with organizational changes in a market that has been particularly hard-hit by a weak economy. Cost-cutting initiatives have included inking a 10-year alliance with Hewlett-Packard for HP to take over Alcatel-Lucent's IT infrastructure. The deal, signed in 2009, also included a plan for joint product marketing.
Higher sales volumes and cuts in fixed operation expenses in general brought good results for Alcatel-Lucent in 2010. Revenue at the company was up more than 5% in 2010 over 2009. Gross profit went up to more than 34% in 2010 compared to more than 33% in 2009. More specifically, Alcatel-Lucent enjoyed strong percentage growth in its IP division (24%), wireless business (14.6%) and networks segment (6.2%), but it weathered declines in its wireline and optic businesses, down 4.4.% and 7% respectively.
Strong demand in the mobile market and other beneficial economic factors led to a 21% increase in 2010 US sales, especially in the IP and wireless categories. Mainly because of poor demand in its wireless business, European sales were weak that year. The European segment represented more than 31% of revenue in 2010, compared with more than 34% in 2009. Sales in Asia/Pacific were down 2% in 2010 compared with 2009, primarily because China decreased spending after a big 2009 push for 3G networks.
As consumers demand more from their smartphones and other devices, Alcatel-Lucent is shifting the focus of its research and development efforts. In 2008 the company spent about 75% of its 2.5 billion-euro R&D budget on improving existing technologies. In 2010 the company spent 75% of that same R&D budget on new technologies.
The company's acquisition and divestiture strategy has aimed at building its service provider product portfolio and jettisoning non-core businesses. The company bought France-based mobile software and application development tool maker OpenPlug in 2010. Late that year, it sold its Adixen vacuum pump business to Germany-based Pfeiffer Vacuum Technology for €200 million (about $279 million). The business -- which makes vacuum pumps, leak detectors, gauges, plasma sensors, valves, flanges, and fittings under the ADIXEN brand -- was not considered core to Alcatel-Lucent's long-term strategy. The vacuum pump unit fits better as part of Pfeiffer Vacuum, which also gained an expanded international sales network and access to Asian markets.
In 2011 Alcatel-Lucent announced receipt of a binding offer for its call center services unit Genesys. The UK-based private equity firm Permira proposed $1.5 billion for the business. Alcatel-Lucent had been considering its options with its entire Enterprise Applications unit, ultimately deciding Genesys wasn't necessary to that business' contributions to a unified communications and data networking strategy.