Lucent's Last Stand
Alcatel-Lucent (ALU) is set to deliver its third-quarter candy Wednesday morning, and investors are curious whether CEO Pat Russo will continue to hand out the treats.
After going three-for-three on quarterly shortfalls this year, Russo was put on notice by the Alcatel-Lucent board and given one month to present an "emergency plan" for the company.
That month ends tomorrow, and Russo has already said, as indirectly as possible, that more firings are ahead.
"Given ongoing dynamics in the rapidly changing telecom industry," Russo said last month, "the company is taking steps to accelerate the execution of its current restructuring program and to implement additional focused cost reduction plans."Since its merger last year, Alcatel-Lucent has been struggling to integrate its sprawling telecom equipment businesses amid a spending slowdown in networking gear. The two trends have haunted Russo during her entire run as the combined companies' chief executive. Alcatel Lucent's original target was to eliminate 9,000 jobs over three years. Then, after a profit shortfall in February, the target was expanded to 12,500 workers. Similar to her tenure at Lucent, Russo has had the misfortune of managing companies down. Telco consolidation and fading revenue opportunities have left Russo with heavy burden of repeated cost-slashing adjustments. Russo was issued the "full confidence" statement from the Alcatel Lucent board last month, but industry observers say unless the company's fortunes start turning around quickly, it will be hard for her to keep her job. Perhaps one factor in her favor is that the two most likely successors left the company in August. Former COO Frank D'Amelio left the communications equipment giant to take the top finance job at drug shop Pfizer (PFE). And former President Mike Quigley decided to "return to Australia," according to the company. Other gear peers have also felt the squeeze in recent months. Tellabs (TLAB) and Ericsson (ERIC) both warned of weaker-than-expected orders for phone equipment in the U.S. Last month, Alcatel-Lucent lowered its guidance for the year, saying sales could be flat compared to 2006. Prior to that, the company had expected single-digit top-line growth for the year. For the third quarter, analysts are looking for an adjusted profit of 3 cents on sales of $6.2 billion. So far this year, Lucent shares have lost a third of their value. The stock was down 4 cents to $9.56 in midday trading Tuesday.
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