Alcatel-Lucent: Don't Blame Ben

So Ben Verwaayen is leaving Alcatel-Lucent. Did he jump or was he pushed? There's little doubt that industry chat in the coming days will focus on whether he did a good job (or not) during his four-plus years at the helm. (See Verwaayen Quits as Alcatel-Lucent CEO.) If Verwaayen has been levered out of the job by influential investors and board members wanting fresh ideas from the CEO's chair, then Verwaayen can be entitled to think himself somewhat unfortunate, because the vendor's current problems stem from well before he took over in 2008 and are the result of weak corporate governance from 2004 to 2008, a key period in the company's development. When Alcatel-Lucent (or Alcatel-minus-Lucent, as some called it) was formed in 2006 by the merger of Alcatel and Lucent Technologies, it was an overweight, somewhat arrogant outfit already strangling itself with political in-fighting. The initial CEO, Pat Russo, had been the chief at Lucent, so there was continuity at the top of the management team. And that made sense, at least for a while. But Russo's executive team contained little (if any) fresh blood. It was a combination of CXO-types from Alcatel and Lucent and that resulted in stagnation. If the board had had its wits about it, it would have ousted Russo after a year and appointed an outsider to instill some order, curb the in-fighting and revamp the company's portfolio and strategy. By the time they brought in Verwaayen, in September 2008, it was almost too late. He spent the first six months clearing out many of the old guard and building his own senior executive team and the company cut thousands of jobs. But the product portfolio remained largely untouched. Sure, he could have been more brutal and cut deeper in terms of head count and product range. But one of the Verwaayen's main strengths was also one of his key weaknesses -- he cared too much about the company. Verwaayen had harbored ambitions to make Lucent a true world leader (and merge it with Alcatel) since the early 2000s when he was vice chairman of Lucent. (See this article about Verwaayen's appointment, where we dig into his background.) When he finally got his chance to shape the company, he had a solid set of personal attributes: knowledge of the company; a personal desire (beyond financial compensation and pure ego) to make the company a success; and very relevant experience of customer requirements, having been CEO of BT Group plc in his prior role. From his time at BT, Verwaayen could see where the market was going, which is why he steered AlcaLu's portfolio strategy more toward Service Provider Information Technology (SPIT). (See AlcaLu's New Vision: More Convergence and AlcaLu Shows Off Its Apps Abs.) But as he pushed in new, more relevant directions, he retained much of the portfolio baggage, and that dragged the company down. Nokia Siemens Networks, which was formed in April 2007, suffered from the same lethargy and didn't administer a major revamp until late 2011, a move that is now starting to deliver some stability. (See Has NSN Turned a Corner?) By the time Verwaayen finally started cutting into the legacy body of the company and pruning the workforce further with a series of measures announced during the second half of 2012, it looked to many like a case of too little too late. (See Alcatel-Lucent to Cut 5,000 Jobs, Alcatel-Lucent: Too Little, Too Late? and Alcatel-Lucent Sharpens Its Focus.) Recent financial developments suggest the new measures might just be enough, though the financial report for the fourth quarter and full year 2012 was a mixed bag of optimistic signs and worrying numbers. (See Alcatel-Lucent's Q4 Inheritance.) AlcaLu is not out of the woods yet -- not by a long way: 2013 is looking like a very tough year, especially as NSN is resurgent (especially in 4G) and Ericsson AB and Huawei Technologies Co. Ltd., though not immune to macro-economic and industrial pressures, can sense AlcaLu's ongoing vulnerability. There's no doubt that Verwaayen could have made some tougher decisions sooner during the past four-plus years, but he was handed a poisoned legacy to manage. Even though he has been the chief executive and the individual driving the company since late 2008, Verwaayen did just about as well as he, or anyone else, could have done. So don't blame Ben for AlcaLu's current precarious position -- blame the board. — Ray Le Maistre, International Managing Editor, Light Reading

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