Updated from 8:22 a.m.

Alcatel-Lucent

(ALU)

sharesrose sharply on Tuesday after an announcement that embattled CEO Pat Russo and Chairman Serge Tchuruk, architects of the company's merger, will leave the company.

The announced changes come as the Paris-based telecom-equipmentmaker notched its sixth consecutive quarterly shortfall. Shares wererecently up 23 cents, or 4%, to $5.99.

Russo will step down from the chief executive role by year-end, andTchuruk will leave on Oct. 1. As the company searches for a new chairmanand CEO, it also plans to shrink the size and change the composition ofits board. To that end, former Lucent Technologies CEO Henry Schachtwill resign from the board immediately, "believing that, being a formerCEO, he should not remain beyond the transitional stage of the merger,"the company said.

"The merger phase is now behind us," said Tchuruk in a companystatement. "It is now time that the company acquires a personality ofits own, independent from its two predecessors. The Board must alsoevolve and the Chairman should give the first example, which I havedecided to do."

Russo, who has held the CEO title since January 2002, said: "Ourstrategy is taking hold and our results are demonstrating goodoperational progress. That said, I believe it is the right time for meto step down. The company will benefit from new leadership aligned witha newly composed Board to bring a fresh and independent perspective thatwill take Alcatel-Lucent to its next level of growth and development ina rapidly changing global market."

Russo has been attempting to turn the networking equipment giantaround through a restructuring plan, which has called for the firing of12,500 workers. During that time, the company has suspended dividendpayments, and the stock has tumbled more than 50%. Investors had beencalling for Russo's ouster since Alcatel-Lucent's 2006 merger, upsetwith the company's performance and her pay package.

In a separate release, Alcatel-Lucent reported a second-quarter netloss of 1.1 billion euros ($1.7 billion), or 49 euro cents a share. Onan adjusted basis, the company's net loss came to 222 million euros, or10 euro cents a share. That compares to an adjusted net loss of 336million euros, or 15 euro cents a share, in the year-ago quarter.

Revenue came to 4.1 billion euros, a 5.2% decline from the samequarter last year. On average, analysts expected Alcatel-Lucent to posta profit of 4 euro cents on revenue of 4.1 billion euros, according toThomson Reuters.

Despite the loss, Russo said the company "made good progress againstour turnaround plan in the second quarter." Alcatel-Lucent expects itsrevenue to be flat to slightly down sequentially in the third quarter,followed by a strong ramp in the fourth quarter. Russo reiterated thecompany's previous guidance for full year 2008 revenue, which should bedown in the low to mid single-digit range.

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This article was written by a staff member of TheStreet.com.