Pat Russo & Serge Tchuruk, Alcatel-Lucent
The saga that is Lucent Technologies continued long after Rich McGinn was let go, with the company whose future seemed bright in the late 1990s struggling to survive in the wake of the telecom bust. On the verge of bankruptcy by 2006, Lucent finally began talking merger with France-based provider Alcatel, which had reportedly approached the company for the first time back in 2001.
Tchuruk, left, and Russo, right (Image source: Reuters)
The merger of Lucent and Alcatel, on the surface, looked like a win-win: Lucent's remaining assets and century-plus legacy would remain intact, while Alcatel gained a foothold into the U.S. market. Combined, the companies would form the largest telecommunications equipment manufacturer in the world.
Tapped to lead the combined company after their 2006 merger were Alcatel executive Serge Tchuruk as Chairman and Lucent veteran Pat Russo continuing her role as CEO.
Shifting Russo into the CEO role at the newly formed Alcatel-Lucent seemed to make sense: After taking the reins of Lucent as CEO in 2002 after its misreporting debacle, she had steered the equipment manufacturer through the rough waters of the telecom bust. Her past management experience at AT&T prior to the Lucent spinoff would give her insight into its workings that Alcatel needed in order to effect a smooth transition to a merged company.
Tchuruk at the time of the merger was chief executive of Alcatel, two months away from retirement from the multibillion-dollar company that had grown to more than 200,000 employees. He extended his time as chief executive and with Russo co-chaired the companies' integration process.
But the bets didn't pay out. Alcatel-Lucent saw six straight quarters of net loss under the Tchuruk-Russo mantle, with revenues consistently underperforming analyst forecasts. As shareholders howled over huge market losses, Tchuruk resigned in October 2008, followed by Russo, who stayed in the CEO role until replacement Ben Verwaayen came aboard.
Reasons for Alcatel-Lucent's underwhelming start are many. Despite the surface appeal of the merger, the companies, according to reports, were plagued by cross-cultural differences and a language barrier, The New York Times reported in 2008. A soft capital spending environment combined with the decline of traditional wireline made for tough going as well. In the end, the Tchuruk-Russo team just couldn't make it work.
"The first step in recovery is admitting you have a problem," FierceTelecom's Dan O'Shea wrote in 2008. "The second, third, fourth and fifth steps involve launching a broad strategic review, shaking up management, selling asset stakes to raise cash and taking renewed aim at your biggest competitors."
Under Verwaayen's leadership, the company began taking more drastic steps to streamline its operations and cut costs, selling off non-core assets like its satellite division and its stake in Thales SA, and laying off employees. Alcatel-Lucent finally recorded its first profitable quarter in 2009. That's not the end of the story, of course, because the Franco-American company's earnings have remained on shaky ground since. As it continues to struggle in the competitive telecom equipment arena, Alcatel-Lucent's future is far from secure.