Lucent veteran Russo's new challenges

One analysts said running the combined company from Paris, she is bound to face some resistance as an American -- and as a woman

Patricia Russo, chairman and chief executive officer of Lucent Technologies, has seen a lot of change since helping to found the AT&T spinoff in 1996. But she'll need to deal with a lot more of it if Lucent's merger with Alcatel SA goes through.

As CEO of the combined company, which is yet to be named, Russo will be based in Paris and working with a management team and a board that draw from both of the network equipment companies. Serge Tchuruk, chairman and CEO of Alcatel, will become non-executive chairman of the combined company. The deal, announced Sunday, is subject to regulatory and other approvals and is expected to close within six months to a year.

Russo, who took over Lucent as CEO in 2002, oversaw the company's recovery from the brutal telecommunications slump that began in 2001 and gutted carrier spending and equipment vendors' business. The Murray Hill, New Jersey, company had fired former CEO Richard McGinn and undertaken a series of restructurings under interim chief Henry Schacht when she took over, and Russo continued the trend. She made cuts that included a core network switch, the TMX 880, that had been in trials with carriers when it was discontinued in October 2002.

In February 2003, Russo earned the added title of chairman. In October of that year, Lucent turned a profit again for the first time in three years.

Russo did a good job of deciding what to cut and what to maintain, according to Michael Howard, a long-time network equipment analyst at Infonetics Research Inc. For example, the company continued development of its long-haul optical equipment business even while that industry was in a slump caused by overcapacity. That move has paid dividends recently as the sector has rebounded, Howard said.

Running the combined company from Paris, Russo is bound to face some resistance as an American -- and as a woman, even though that issue may not be openly expressed, Howard said. Russo expects to cut about 10 percent of the combined companies' work force of about 88,000, she said on a conference call. However, Howard believes the direct and pragmatic style that has brought results during her tenure at Lucent will win over most opposition at the new company.

A key benefit to the way the merger has been proposed is that the companies have made clear she will be in charge, with Tchuruk taking a non-executive role, Howard said.

Russo was already an old-line AT&T and Lucent executive when she returned from a short stint running Eastman Kodak Co. to take on the CEO post. She has spent more than 20 years of her career working at Lucent and its predecessor, according to the company. Russo first came to AT&T in 1981 after eight years in sales and marketing at IBM Corp. She joined the carrier before the 1984 court-ordered breakup that gave rise to the regional Bell operating companies and eventually to the spinoff of Bell Labs as Lucent. Before leaving for Kodak, Russo had been executive vice president and CEO of Lucent's service provider equipment division, which had become the core of the company in a restructuring initiated by Schacht.

Copyright © 2006 IDG Communications, Inc.

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