Alcatel-Lucent Founders Quit To Turn Page On Merger And Losses


Agence France Presse
July 29 2008

PARIS (AFP) — The founders of telecom equipment giant Alcatel-Lucent,
Serge Tchuruk and Patricia Russo, resigned Tuesday to allow the
French-US group to make a fresh start after suffering six straight
quarterly losses.

The dramatic shake-up followed rumours that one or other might leave
the company and that their respective management styles had contributed
to the group’s difficulties.

Just 20 months after the mega transatlantic tie-up, Alcatel-Lucent
and its two marriage brokers signalled that the the company had to
clear the way for a new beginning.

The news appeared to cheer investors, with shares in Alcatel-Lucent
gaining 2.09 percent to close at 3.91 euros on a generally weaker
Paris market.

Alcatel-Lucent reported a second-quarter loss of 1.1 billion euros
(1.7 billion dollars) and signalled coming changes in governance. The
price of the shares rose 4.44 percent to 4.0 euros.

This was sixth quarterly loss in a row and came amid a global
restructuring to shed 16,500 jobs by 2009.

Tchuruk, the 70-year-old non-executive chairman who will leave office
on October 1, said: "The merger phase is now behind us."

"The time has come for this company to acquire an identity which is
its own, independent from those of the two original companies."

Alcatel-Lucent said Russo, a 56-year-old American, had decided to
resign her post as chief executive by the end of the year but would
"continue to direct the group to ensure the transition."

Russo herself explained that "a new general board and a recomposed
supervisory board will offer a new and independent perspective."

"It is time for the company to move beyond, to let the merger take
it to the next level.

"Our strategy is beginning to pay off and our results are steadily
improving, quarter after quarter but there is a lot more work to do,"
she said, notably as "the slowing of the US economy is starting to
spread in Europe."

A portfolio manager at SwissLife Gestion Privee, Jean Philippe Muge,
commented: "It’s good news for traders who have a bad impression of
Tchuruk in particular."

Tchuruk, who survived as head of Alcatel after many other top managers
lost their jobs when the Internet bubble burst in the late 1990s,
had fought hard for the merger with Lucent.

He had managed to return Alcatel to profit in 2005 after years of
dismal performances.

The December 2006 merger — effectively a takeover by Alcatel —
was intended to give both parties the power to overcome damage from
the high-tech bubble, disruption from digital technology, challenges
from opening markets and fierce competition from new rivals in Asia.

Such strains were common to many telecom-related groups in advanced
countries during and after the high-tech bubble, but the Alcatel-Lucent
Technologies strategy attracted special attention and some controversy.

The two companies had strong national images and were in the hands of
high profile chief executives. There was also considerable interest in
seeing how a mixture of French and US business cultures would turn out.

Russo ran Lucent Technologies — spun off from AT&T in September
2006 and including the storied research and development hothouse Bell
Laboratories — from 2002 to 2006.

One of the few women at the top of international corporations, she
has a reputation for being tough, and was classed by Forbes business
magazine last year as one of the 10 most powerful women in the world.

She now leaves the group with up to six million euros as a leaving
payment, or two years of pay, the company said, under controversial
arrangements made in May. She also holds 800,000 stock options,
exercisable at 3.80 euros.

Tchuruk, born in Marseille to Armenian parents who had fled Turkey,
focused Alcatel on telecommunications equipment after taking charge
in 1995. He now earns only payments for attending meetings, amounting
to 100,000 euros per year.

The group, which has issued several profit warnings and launched a
number of restructuring operations, made a net loss in 2007 of 3.5
billion euros after a loss of 176 million euros in 2006.

The latest quarterly loss arose largely from a goodwill asset writedown
of 810 million euros for the CDMA standard of mobile telephones,
mainly in the US market, because one big client in North America had
cut investment sharply.

Sales in the quarter fell by 5.2 percent to 4.101 billion euros by
comparison with the equivalent figure last year. But from the first
quarter figure they rose by 6.1 percent, exceeding the group’s forecast
of 4.0-6.0 percent.

The loss was far bigger than expected by analysts although sales were
in line with their estimates.

The group stood by its sales forecast for the year, signalling a
decline of 2.0-5.0 percent.

Russo insisted that despite the worsening second-quarter loss, about
double a net loss of 586 million euros in the second quarter of last
year, "our strategy is showing through progressively."

The board said it would "immediately begin the search for a new
non-executive chairman and a new chief executive" and would also
change its composition to reduce the number of its members.