Quarterly earnings time hasn’t ever been a happy time for Alcatel-Lucent. This quarter is no exception as the company lowered profit expectations again and CEO Pat Russo decided to take a walk. In addition to Russo’s departure, Chairman Serge Tchuruk, architect of the merger, will leave Oct. 1.
Once again Alcatel-Lucent reduced its quarterly forecast; since the merger, Alcatel-Lucent has reported six consecutive quarters of losses. For its Q3 sales, the company said it expected to remain flat or decline against the previous three months through June. Unfortunately, investors were looking for growth of about 2.5%. The company’s stock has tanked some 63% in the last 18 months.
Media reports have differing reports about whether Russo’s departure was voluntary or foisted upon her. Regardless, the handwriting was on the wall following the last shareholder meeting in May when the board agreed upon rules to make it easier to replace merger executives.
Two years ago, Alcatel and Lucent, two powerhouse corporate names opted to merge –Lucent to gain European reach and Alcatel to capitalize on Lucent’s technology. What might have seemed like a good idea on paper never really materialized as the two companies struggled with corporate and nationality culture clashes as well as increased competition from Asian rivals.
Chief among the problems that have beset the new entity was it took too long to decide on its combined technology portfolio. This resulted in reticence from customers amid fierce competition.
Alcatel-Lucent never seemed to gain traction against the efforts of new Asian players, particularly Huawei and ZTE. In fact, Huawei’s aggressive pricing allowed it to move into the #4 global telecom network equipment slot ahead of Nortel Networks and Motorola.