Alcatel-Lucent CEO, chairman stepping down

Alcatel-Lucent's CEO and chairman are stepping aside as the company continues to face big losses and increased competition from Asian suppliers.

The telecommunications equipment giant said Tuesday that CEO Patricia Russo and Chairman Serge Tchuruk will leave later this year. Russo will finish out the year as she helps the company look for a new CEO, and Tchuruk, who helped architect the mega-merger between Lucent Technologies and Alcatel, will leave October 1.

The company said the two executives had stepped down on their own accord. It is a move, however, that shareholders have urged for months.

And who could blame them. Since the combined Alcatel-Lucent started operating as a single company in December 2006, it has lost more than half its value. It has faced six consecutive quarters of losses and has shed critical market share in several telecom equipment categories.

Executives sold the merger to investors two years ago as a great way to cut costs and compete more effectively with emerging rivals in Asia. But the reality has been much different. Combining any two large companies rarely goes smoothly. But the task of combining the U.S.-based Lucent and France-based Alcatel was further complicated by cultural differences between the two companies, which analysts say remain unresolved.

As the company tried to combine forces despite the hurdles, its competitors rallied and began stealing customers. In addition to facing competition from the usual players, such as Ericsson, Nortel Networks, and Nokia Siemens, the company also faced increasing competition from new players like Chinese rivals ZTE and Huawei.

These competitive forces, combined with the company's inability to make decisions quickly enough or to retain key executives, have fueled major losses. The company has issued profit warning after profit warning.

Despite promises from Russo last year that a turnaround was in the works, the company's shareholders and board of directors apparently have lost confidence.

For the second quarter, the company reported sales and profits slightly ahead of expectations. It also reported a major loss due to writedowns.

Its immediate future looks bleak amid concerns over the economy. As a result, the company has cut its forecast for third-quarter sales, saying it expects revenue to remain flat or decline compared with the previous quarter. Investors had hoped for a 2.5 percent increase in sales. The company also expects 2008 revenue to fall "in the low to mid single-digit range."

In addition to the departures of Russo and Tchuruk, Henry Schacht, who preceded Russo as Lucent's CEO prior to the merger, will resign from the board immediately, the company said.