Business as usual for Alcatel-Lucent

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Business as usual for Alcatel-Lucent

Alex Scroxton

It did not take long after the merger for things to start going wrong for Alcatel-Lucent CEO Patricia Russo, who opted to leave the vendor last month after admitting she could no longer work with fellow board resignee chairman Serge Tchuruk.

They both resigned following a board meeting on 27 July, ending Russo's period as CEO which started after the merger of Alcatel and Lucent in 2006.

Things had been getting increasingly difficult for the senior management, with a series of quarterly losses leading to a bombardment of negative comment as Alcatel-Lucent stumbled from one round of job cuts to another. The company remains in the midst of a restructuring process, during which the axe will fall again, this time affecting around 16,000 jobs.

Cultural differences

The difficulties of integrating a French company with an American one dominated during Russo's tenure, with analysts suggesting the corporate culture of Lucent clashed with Alcatel's French business model. One source close to the company saw little evidence of cooperation between the two factions from the outside.

Furthermore, the fact that management from the junior partner, Lucent, was handed leadership is understood to have caused resentment within Alcatel; at a shareholder's meeting earlier this year, Russo was met with jeers and was heavily criticised for her inability to speak French and her high salary.

Analysts believed that rewarding the target company's management with overall leadership was a bewildering decision and that bringing in independent directors should have been at the top of Alcatel-Lucent's list of priorities.

Gartner research director Sylvain Fabre suggested Alcatel-Lucent must now refocus its business to find a way out of its current predicament, but believed it would need to do this sooner rather than later.

He believed a turnaround was possible, but warned that the next CEO would have to be from outside the company with no vested interest or historical ties to either party. It would be helpful, he added, if they were not French or American.

Channel approval

In Alcatel-Lucent's favour, the constant pressure on Pat Russo did not cause its channel sleepless nights. The consensus is that it is becoming a more effective competitor in the networking market.

Mark Hatton, managing director of Alcatel-Lucent distributor Sphinx, pointed out that Alcatel-Lucent's financial losses were mainly on the US service provider and carrier business, whereas the enterprise and EMEA businesses had remained strong.

Key partners, including names such as Freedom Communications, voiced similar opinions. Earlier this year, Freedom managing director Pat Botting said Alcatel-Lucent was clearly emerging from its post-merger inertia and saw growing channel focus as a definite catalyst for change.

Spokespeople for Freedom said that while they were watching the proceedings at the top with interest, they anticipated business carrying on very much as usual.

A rosy picture

While he was unable to comment on the departure of Russo and Tchuruk, Alcatel-Lucent enterprise vice-president David Parker moved quickly to reassure UK channel partners that business would be unaffected.

Parker added Alcatel-Lucent was going to be adding new products to the five "cornerstones" of the business - IP telephony, IP infrastructure, contact centres, unified comms and security - with particular emphasis on the security side.

Alcatel-Lucent UK chief marketing officer, Houston Spencer, painted a rosy picture for the overall business in EMEA too. He noted it was performing better than usual so far this year.

Russo, meanwhile, will not formally step down until the end of the year, but high-level names are already being mooted as potential successors.

As reported by MicroScope online, former French finance minister Thierry Breton - a veteran of France Telecom - was linked with the role. But speculation has also mounted that the post is now seen as a poisoned chalice after former BT chief executive Ben Verwaayen ruled himself out of the running.


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