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Optical/IP

Fujitsu Execs Flee

The bigger they are, the harder they fall. That adage could be about to come true for Fujitsu Network Communications Inc., a subsidiary of Japan’s Fujitsu Ltd. (KLS: FUJI.KL).

The company is a leading provider of Sonet equipment to local exchange telephone companies in North America. It has almost 60 percent of that market, and this year it's revenues have rocketed, growing by 65 percent compared to 1999 and reaching $2.18 billion -- two years ahead of target.

Everything, however, is not coming up roses at Fujitsu. A rash of top execs and other staff have fled the company in the past nine months, prompting speculation that its run of phenomenal success could come to an end.

“It doesn’t look good,” says Mark Lutkowitz, president of Trans-Formation Inc. “They’ve lost some key people. I hardly know anyone there anymore. I really wonder if they can remain a powerful player.”

The first major management blow occurred last December when George Chase, senior vice president of sales and marketing, left to join Hook Partners, a venture capital firm based in Plano, Texas.

“When you have an industry guru who takes a company from $200 million in yearly revenue to over $2 billion, a lot of people are going to notice when he leaves,” says Paul Harrison, VP of marketing for Xtera Communications, a Texas-based optical startup. “[Chase's] departure speaks volumes.”

And it set off a chain reaction of resignations. A few months later Ron Kelley, a VP of sales, left to become head of North American sales for optical startup Cyras Systems Inc.. A number of other sales people under Kelley followed his lead and left to join startups, too.

By late spring other executives were leaving. Carl DeWilde, who was in charge of the R&D and strategic planning for Fujitsu, and Bryan Floren, former VP of hardware development and program manager for the Flash600 ADX platform, left in May to join Xtera. So far, at least seven other Fujitsu employees have followed them.

The exodus continued in August with the departure of Greg Wortman, VP of marketing, and Dale Booth, executive VP of Fujitsu Networks Services division. And a slew of others have reportedly left for startups or other projects.

Some executives, however, may have been enticed to stay. In April Ron Martin, who was executive vice president of planning and development, reportedly threatened to quit. He had supposedly been offered a position with the Wu-Fu Chen startup Geyser Networks. But Fujitsu management, afraid of losing another top executive, created the Chief Operating Officer position for him, sources close to the situation say.

“ He threatened to quit, and the Japanese got scared that everyone would leave, so they decided to make him COO,” says one source who wished to stay anonymous.

The director of corporate communications for Fujitsu denies this, saying that Martin has always been committed to the company.

So what is going on over at Fujitsu? Some who have already left say that the company is suffering from a lack of leadership. But Fujitsu claims that this is simply part of an industry-wide trend. Certainly, it is not the only vendor losing key execs to startups. Other large vendors like Lucent Technologies Inc. (NYSE: LU) and Alcatel SA (NYSE: ALA) have also been plagued by the issue (see 50 Ways To Leave Your Lucent and Lucent Faces "Exodus of Nexabit Staff" and Alcatel’s Anti-Startup Agitation ). Nortel Networks Corp. (NYSE/Toronto: NT) has also had its problems (see Is Trouble Brewing in Ottawa?).

Even though Fujitsu has done well retaining employees with higher than average base salaries and generous bonus incentives, it has lacked the option of offering stock, since it is a privately held company in the U.S.

Rumors have circulated for the past several months that the company is preparing for an IPO, which might help Fujitsu out of its problems. But former employees are skeptical. “I’m sure they think that dangling this carrot in front of people will help keep them there,” says one of them. “But the problem isn’t that we don’t have stock options, the problem is the leadership. That’s why people are leaving.”

-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com

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