Board bloodbath at Alcatel-Lucent

Three senior executives at Alcatel-Lucent have announced their resignations, including the architects of the 2006 merger, chairman Serge Tchuruk and chief executive Patricia Russo.

The move is seen as a prelude to a wholesale management cull, which industry analysts believe should have happened soon after the merger.

Shareholder pressure is the likely trigger for the management overhaul. The company said that it will restructure its board, bringing in new blood and shrinking the number of directors.

"Usually in an acquisition, the [target company's] management is shown the door, but Pat Russo became the CEO," said Sylvain Fabre, research director at Gartner and an ex-Lucent employee.

"[Alcatel-Lucent] is doing now what it should have done on day one of the merger."

The company has presented the announcements as a natural progression from its "transitory merger phase". Alcatel merged with Lucent on 1 December 2006.

"The merger phase is now behind us. It is time that the company acquires a personality of its own, independent from its two predecessors," said Tchuruk.

"The board must also evolve and the chairman should give the first example, which I have decided to do."

The resignations come as Alcatel-Lucent released quarterly figures showing improving revenues but deepening losses.

Revenue for the quarter ended 30 June was €4.1bn, up 6.1 per cent on the previous quarter. Income was €93m. But losses for the quarter ran to €1.1bn compared to a net loss of €586m a year earlier.

The board was swollen by "political" appointments, according to Dana Cooperson, vice president of optical networking at research firm Ovum.

Many of the directors were retained to ensure that competing interests from the two original companies were represented and to maintain staff morale during the merger, she said.

"Labour laws in France mean that you cannot move as quickly as you might like," Cooperson added.

Tchuruk is to leave on 1 October, but Russo will stay on until the end of the year if necessary while the board restructures and seeks her successor.

"The board has determined to restructure itself in a way consistent with the company's needs going forward," said Russo.

"As part of this process the board will reduce the size of its membership over time while adding several new members with strong industry expertise."

Russo's successor will need to make tough decisions about product portfolio and in which markets, especially in wireless technologies, it will participate, say analysts.

"Alcatel-Lucent is a geographically and technologically diverse company: products, applications, wireless, wire-line, carrier division, corporate sales and so on," said Cooperson.

A new chief executive will be expected to rationalise the number of products and services the company offers and the markets it serves. This may lead to job cuts beyond the board of directors.

"The company needs a new chief executive and new management and the market needs to hear a statement of strategy very quickly," said Fabre.

"We need to hear what areas the company will focus on and what it will stop doing. It has tried to do too much."

The third person to step down from the board yesterday was Henry Schacht, who was chief executive at Lucent before Russo took the post in January 2002.