Tuesday, French telecommunications equipment maker Alcatel-Lucent (ALU) ended media speculations by announcing a new chairman and chief executive officer, replacing Serge Tchuruk and Patricia Russo, respectively, who announced their resignation in late July immediately following the release of the company's hefty second-quarter loss. The new management changes are expected to give the much struggling company a ray of hope.
Alcatel-Lucent noted that its Board of Directors on Sunday approved the appointment of Philippe Camus as the new non-executive Chairman with effect from October 1. The company also named Ben Verwaayen, a former Lucent executive, chief executive officer. Verwaayen will also join the company's Board of Directors, and will be based in the company's headquarters in Paris.
In late-July, immediately after reporting the second-quarter net loss of 1.102 billion euros, Tchuruk and Russo had announced their resignationS. Ironically, they spearheaded Alcatel's purchase of Lucent Technologies Inc. in November 2006. Since the merger, the company has suffered six straight quarters of losses, has lost more than half of its value and also faces increased competition from Asian suppliers.
The company had then said that the chief executive will leave before the end of the year, but has decided to remain with it until a successor is named to ensure business continuity, while chairman will step down on October 1.
According to media reports, New Zealand-born Mike Quigley, a longtime Alcatel manager who left the company last year, was the front runner for the post of chief executive officer. Quigley was Alcatel's last chief operating officer before the merger, but he left the company shortly after Patricia Russo, the then chief executive officer of Lucent, was chosen to head the new entity.
The new chairman Philippe Camus, 60, a French national and a US resident, was the Co-CEO at European Aeronautic Defense and Space Co., or EADS NV (EADSF.PK, EADSY.PK), the parent of Airbus. He is currently the Co-Managing Partner of Lagardère, a media group, and a partner of New York-based investment and advisory firm Evercore Partners.
Dutch-born Ben Verwaayen, 56, was the chief executive officer of BT Group Plc (BT, BT-A.L) from February 2002 to June 1, 2008. Previously, he was vice-chairman of the management board of Lucent Technologies in the US, which he joined in September 1997. He had also worked with KPN in the Netherlands for nine years as president and managing director of its telecom subsidiary PTT telecom, and also for ITT, a predecessor of Alcatel.
The Board in a written statement said, "Philippe Camus has experience in several high-tech global industries, including the fast-growing media sector, as well as in managing multi-cultural environment. Ben Verwaayen's years of experience in this industry have given him great insight into Alcatel-Lucent. He also has deep understanding of the industry trends and customer needs and is fully committed to innovation, technological excellence and unsurpassed customer service."
Alcatel-Lucent previously had announced that its Board had decided to restructure itself, as it moved beyond the transitional phase of the merger. As part of the process, the company has taken steps to change the composition of the Board to a smaller group that will include new members. To initiate this process, Henry Schacht, who was the chief executive officer of Lucent Technologies before Russo, resigned from the Board.
Meanwhile, media reported that Alcatel-Lucent is looking for $2.8 billion in cost savings by 2009 out of its restructuring efforts. The company, which most likely will cut 16,500 jobs, could solve much of its problems by better management and better execution.
In its second quarter, the company had reported a net loss of 1.102 billion euros or 0.49 euros per share, hurt mainly by write-down from its CDMA operations. Meanwhile, the company's adjusted net loss for the quarter narrowed to 222 million euros or 0.10 euro per share from loss of 336 million euros or 0.15 euro per share last year. Quarterly revenues also declined 5.2% to 4.101 billion euros.
Alcatel-Lucent had said then it expects third-quarter revenue to be flat to slightly down sequentially, followed by a strong ramp in the fourth quarter. Further, Alcatel-Lucent reiterated its fiscal 2008 expectation that revenue would be down in the low to mid single-digit range, and continued to project an adjusted gross margin in the mid thirties and an adjusted operating margin in the low to mid single-digit range.
ALU closed Friday's regular trading session at $6.18, down $0.25 or 3.89%, on a volume of 13.4 million shares.
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