CBS MarketWatch.com
Lucent names Russo as new CEO
Published: Jan. 7, 2002 at 9:46 a.m. ET
Jeffry Bartash
Steve Gelsi
Veteran executive returns to fold after Kodak stint
MURRAY HILL, N.J. (CBS.MW) -- Lucent Technologies on Monday named Patricia Russo its new chief executive, as the troubled telecommunications equipment maker turns to a former insider to lead a turnaround.
Though a 20-year Lucent and AT&T veteran, Russo served as chief operating officer of Eastman Kodak EK for the past nine months. She will succeed Henry Schacht, 67, who will remain as Lucent's chairman.
In 1996, Russo helped launch Lucent's LU, +0.42% spin-off from AT&T T, -0.11%. Before leaving for Kodak, the 49-year-old Russo headed the segment of Lucent that sold equipment to the largest phone companies, such as AT&T and the Baby Bells.
The selection of Russo marks the end of a long and difficult process in finding a successor for Schacht. Some potential candidates for the top job reportedly were wary of joining what was seen as a sinking ship.
For Lucent, the selection of Russo signals once again the company's desire to return to its roots: being a premier supplier of phone equipment for the world's biggest carriers.
At the same time, Lucent can ill-afford to offer any new CEO time to get up to speed with the company straining under the weight of slumping sales and weakened finances. In 2001 alone, Lucent lost more than $16 billion.
"Pat brings deep knowledge of our industry and our customers coupled with the ability to lead a large organization through change," Schacht said in a statement. "She understands and embraces our strategic and restructuring plans, and she can step in as CEO without missing a beat."
Shares of Lucent LU, +0.42% slid 15 cents to close at $6.95. Eastman Kodak, a Dow Jones Industrials component, lost 95 cents to $27.94.
Despite Russo's impressive qualifications, some investors are likely to wonder what role she played in the company's decline. Russo was a top executive under the Rich McGinn regime, when most of Lucent's troubles blossomed.
During McGinn's tenure, Lucent sharply accelerated growth via sales to Internet and telecom startups and made a series of costly acquisitions. The growth proved unsustainable after the high-tech boom fizzled, however, and most of the acquisitions did not pan out. In addition, Lucent fell behind rivals in several key market segments and has been racing to catch up.
In a belated effort to reinvigorate Lucent, McGinn moved to spin off several key units, including Avaya, and to merge the service-provider segment that Russo headed with the corporate-service unit. Faced with a reduced role at Lucent, she left to become the chairman of Avaya and later was hired by Kodak.
For the past year and a half, Schacht -- who returned from retirement to replace McGinn -- has been selling off business units, shedding workers and reshaping Lucent's finances. Russo is taking over a company much smaller than the one from which she had departed.
"She knows our service-provider customers better than anybody," Lucent spokesman Bill Price said. "Pat won't miss a beat."
Analyst Shayna Malmak of Williams Capital Group said the equipment vendor made a good choice considering its current predicament, but she wondered whether Russo would be able to shed her insider's view and bring a fresh perspective as to what kind of company Lucent should be.
A more pressing question, she said, is whether Russo can achieve Schacht's prediction of breakeven results by the end of 2002. Lucent has already said it will miss first-quarter targets and Malmak is "very skeptical" - a common view on Wall Street these days - that the company can get back into the black without more cost cuts.
Meanwhile, Rochester, N.Y.-based Kodak said CEO Daniel Carp will re-assume the responsibilities of president and COO with Russo's departure. An executive search is planned.
"Pat made a strong contribution during her nine months at Kodak," Carp said. "She and I developed a new operating model that will help accelerate performance improvements across all our businesses. I remain focused on successfully implementing that model and generating increased value for all shareholders."
Jeffry Bartash is a reporter for MarketWatch in Washington.
Steve Gelsi covers banking and cannabis as a Senior Reporter for MarketWatch.