Optical/IP Networks

Tough Month Ahead for AlcaLu's Russo

Alcatel-Lucent (NYSE: ALU) saw its share price rise by nearly 5 percent Friday following media reports that CEO Pat Russo has been given a month to come up with a new corporate plan that will turn the vendor's fortunes around.

Light Reading has received confirmation that the vendor held an Extraordinary Board Meeting a week ago (Friday, September 21) to discuss the company's plans following a series of profit warnings and disappointing financial presentations. (See AlcaLu Cuts 2007 Outlook by $1.25B, AlcaLu's Russo: We're Under Attack!, Alcatel-Lucent Slumps on Q2 Loss , Merger Tears Into AlcaLu's Sales, and AlcaLu Breaks Down (in) 2006.)

Russo stated on September 13, when AlcaLu announced it was cutting its revenues forecast for the full year, that further restructuring measures would be taken into account for ongoing market pressures, and that those new measures would be announced when the vendor next holds a quarterly earnings call on October 31.

Now the Financial Times reports that Russo has been asked to present a new strategy to the company's board on October 30, including plans for greater restructuring of staff and product lines.

In addition, French newspaper Les Echos this morning reported talk among financial analysts that Russo may resign.

The FT, though, reported that Russo's position as CEO is not under any immediate threat.

The reports sent Alcatel-Lucent's share price up nearly 5.4 percent Friday to €7.27 on the Paris stock exchange. The company has seen its share price fall by more than 28 percent since it opened its doors on December 1, 2006, when its stock stood at €10.12.

On the NYSE this morning, AlcaLu's share price was up $0.44 (4.51%) to $10.19 in midmorning trading.

AlcaLu declined to comment on the speculation surrounding Russo's continued role as CEO, but a spokesman confirmed the company "has been looking at ways to accelerate those plans in light of the September 13 announcement. As would be expected management reviews its plans with the Board. The company takes seriously the need to improve the financial performance of the business and is taking the necessary steps."

No further details about those steps are being articulated at present.

Just how long Russo will remain as CEO is certainly a topic of much discussion among industry executives. At an industry event in Geneva this week a number of executives, who responded to questions about Russo's role under conditions of anonymity, suggested that AlcaLu would likely have a new CEO by this time next year. But none believed Russo would resign or be sacked in the near term.

And one person close to AlcaLu dismissed the idea that Alcatel's former COO Mike Quigley might return as CEO at some point, even though such a move would likely be seen as a positive by many AlcaLu staff. "Once you've left [AlcaLu] you're never coming back," suggested the executive.

AlcaLu announced the departure of Quigley and of the vendor's chief administrative officer Frank D'Amelio last month. (See Quigley, D'Amelio out at AlcaLu.)

— Ray Le Maistre, International News Editor, Light Reading

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