Management Turnover as Change Agent

Monday, May 5, 2008

CEO Watch - Alcatel-Lucent, Patricia Russo, Update 3

Alcatel Lucent ALU (NYSE) has continued to disappoint.  The company's latest earnings results remained negative and even below expectations.  Alcatel-Lucent's CEO, Patricia Russo, remains on the hot seat.  Today's Evan Newmark piece in the WSJ's Deal Journal examines the difficulty two large transnational companies face when they try to merge.  
The integration of the two companies has
 been painful. ... A clash of cultures and personalities is inevitable. Yet, a year or so into these deals, you always hear about “underestimating the difficulties of integration.”

At Alcatel-Lucent, the senior management team chart from the “Day One” Investor Presentation was a labyrinth of reporting lines and 24 smiling European and American faces. I am surprised investors didn’t run screaming from the room when that slide was put up. In the first year of the combination, Russo lost three of the company’s top executives, including President Mike Quigley and Chief Financial Officer J.P. Beufret, both highly regarded by investors.
Newmark examines whether Russo is at fault for the problems or whether there is far more to the problem.  Considering Russo's results so far, she must bear a large portion of the problems.  I remain skeptical about her staying power at the top of the firm.  Keep a close eye on what happens.

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