Verwaayen to take top job at troubled Alcatel-Lucent

By Sarah Arnott
Sunday 23 October 2011 08:49

Alcatel-Lucent, the troubled fixed-line network provider, is turning to the man from BT to lift its ailing fortunes and soothe its transatlantic internal fractures.

Ben Verwaayen, who stepped down as the chief executive of the UK's incumbent telecoms giant at the end of May, is taking over as head of the French-American company, following the ousting of both the chairman and the chief executive in July.

Pat Russo, the former chief executive, and Serge Tschuruk, the former chairman, were closely involved in the merger of the two companies in 2006. They were given their marching orders by angry investors after six consecutive quarters of losses, rising to $1.1bn (£617m) in the second quarter of this year. The group has cut 16,500 jobs and lost roughly $7bn since the merger. Despite regaining 30 per cent of its value since the resignations, the stock is still down 60 per cent on its December 2006 level.

Mr Tschuruk's role is to be filled by Philippe Camus, a French national and US resident, a former executive at EADS and currently a managing partner of Lagardère, the international media group, and a partner at Evercore, a New York investment company.

Mr Verwaayen, who spent six years leading BT, will need to prove value can be extracted from a merger that has been dogged by cultural and operational issues. "It was a bit like joining the lame and the blind, but they are still better off together than apart," Clara Van der Elst, an equity analyst at Standard & Poor's, said. "Mr Verwaayen will need to continue with the integration and also convince the group's clients that Alcatel-Lucent is a viable partner to do such long-term business with."

The Dutchman looks like a good choice for turning the company around. BT was in a bad way when he took over in 2002. By the time he left, it had seen 24 consecutive quarters of earnings growth. Some of Alcatel-Lucent's problems stem from the cultural difficulties of joining a French company with one from the US. Ms Russo, who ran Lucent Technologies before the merger, always promised to learn French but in the end never did, which was a source of much friction. Both Mr Verwaayen's appointment, and that of Mr Camus, could help overcome the divisive nationality issues.

Sylvain Fabre, a research director at Gartner, said: "Ben Verwaayen has a background of business turnarounds and also the softer attribute that he is neither French nor American, which should help put to rest the cultural clash that derailed a merger in the first place and has caused such problems since it went ahead."

But there are also major issues with the sprawling group's product portfolio. The technology mainstay of the Lucent business, for example – a networking protocol called CDMA – is being pushed into obsolescence by newer rivals like GSM and W-CDMA. "The new chief executive will have to make drastic changes to re-focus the company," Mr Fabre said. "People can agree or disagree with what the specifics are, but the group at least needs to have a story that establishes its place in the world."

Mr Verwaayen will receive a fixed salary of €1.2m (£977,000) in his new role, plus a bonus of €1.8m and 1 million shares.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments