Russo returns to Lucent as CEO

Ex-division head to try to pep up sales and reduce losses

January 08, 2002|By BLOOMBERG NEWS

MURRAY HILL, N.J. - Lucent Technologies Inc. named former division head Patricia F. Russo chief executive officer yesterday to try to revive telephone-equipment sales and stem losses that totaled $16.2 billion in the last fiscal year.

Russo, 49, had been president and chief operating officer at Eastman Kodak Co. for less than nine months after leaving Lucent in August 2000. She replaces Henry B. Schacht, who ends his second stint as Lucent's CEO and will resign as chairman within a year.

Calling Schacht's turnaround strategy "sound and credible," Russo said in an interview that she will continue to focus on selling gear, software and services to big phone companies such as Verizon Communications Inc., rather than pursuing contracts from corporations and emerging carriers. Lucent has been seeking a CEO since October 2000, when it ousted Richard B. McGinn and asked Schacht, 67, to return to his old post.

"This removes one of the concerns we had with Lucent," said Steven Mygrant, a money manager at Fifth Third Bancorp, which owns Lucent shares. "There might be some investors who were looking for ... an outsider. We think she's very capable."

Russo returns to Lucent at a time when even established phone carriers such as Qwest Communications International Inc. repeatedly have slashed equipment spending because of falling demand for their services.

"She's got a big job ahead of her," said Avaya Inc. CEO Donald K. Peterson, who was Lucent's chief financial officer when Russo ran the company's service-provider unit. "They've been doing a lot of things that needed to be done in shaping the cost structure, but that business also needs a continuing focus in the evolution of its products."

Schacht had eliminated more than half of Lucent's work force and shed businesses, including a unit that makes optical fiber and cable. He said Lucent can break even, before certain costs, at some point in the fiscal year that began in October with quarterly sales of $4.75 billion.

Some investors, who held out hope that Lucent would lure an established CEO to succeed Schacht, were disappointed that the company brought back an AT&T Corp. veteran. Russo spent 19 years at AT&T and Lucent, which was spun off from the long-distance phone company in 1996.

"It's a bad sign," said Walter Casey, an analyst with Banc One Investment Advisors, which owns Lucent shares. "She was part of the whole McGinn regime that was part of the problem."

Under McGinn, Lucent pursued orders from smaller phone companies, a strategy that backfired when many of those smaller carriers ran out of money. Sales also slumped when Nortel Networks Corp. and Cisco Systems Inc. beat Lucent to market with new fiber- optic and data networking gear.

Russo said she won't make any changes to Schacht's management team and "absolutely expects" Bill O'Shea and Bob Holder, executive vice presidents and two of Schacht's top lieutenants, to remain with the company.

Lucent shares slipped 15 cents to $6.95 yesterday. They are down more than 90 percent from their December 1999 high.

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