Alcatel-Lucent hopes Combes can turn around struggling firm

French government reportedly mulling stake in telecom equipment firm

Alcatel-Lucent (NYSE: ALUis looking to telecom veteran Michel Combes to turn around the struggling telecom equipment maker.

Combes will take the reins on April 1, replacing Ben Verwaayen, who stepped down on the same day the firm announced its fourth quarter and yearly financial results. For the fourth quarter, Alcatel-Lucent reported a net loss of €1.37 billion ($1.8 billion) on revenues of €4.1 billion ($5.4 billion).

On the same day that the Combes announcement was made, Bloomberg reported that the French government was considering taking a stake in the company in order to protect the patents pledged to secure a €1.6 billion ($2.1 billion) loan to help with its a €1.25 billion ($1.7 billion) restructuring program. According to an anonymous government official, the Fonds Strategique d'Investissement might take a minority stake in the company.

The report spooked investors, sparking a 4 percent drop the company's in stock price on the New York Stock Exchange on Friday. The stock closed at $1.41 per share, compared to its 52-week high of $2.66.

George Kesarios, a contributor to Seeking Alpha, recommended that investors sell their shares in Alcatel-Lucent. "Let me tell you what this all means, because I am from Europe and I know how French bureaucrats think (they think the same like Greek bureaucrats). They really don't care about the company or protecting its patent portfolio. They also don't care about the shareholders. The only thing they care about is for the company not to lay-off any more people while it is in reorganization mode," he wrote.

Even if the French government does not take a stake in the firm, Combes has his hands full turning Alcatel-Lucent around. He has the experience, having led a $3 billion cost cutting program at Vodafone. That experience will be tested as he implements a massive €1.25 billion ($1.7 billion) restructuring program that includes asset sales and 5,500 job cuts.

For more:
- see Alcatel-Lucent's Combes announcement
- read the Bloomberg report
- check out the Seeking Alpha article

Related articles:
Alcatel-Lucent to use €1.6 billion in new financing to fund restructuring program
Alcatel-Lucent to sell assets, lay off thousands