Alcatel Talks Up Its Prospects to Holders
By Jethro Mullen and Leila Abboud
The Wall Street Journal
Saturday May 31, 2008
Alcatel-Lucent tried to reassure restive shareholders at its
annual meeting that its long-term growth prospects were strong,
despite the competitive pressures buffeting the
The meeting, held here Friday, was the second since the merger
in late 2006 of Alcatel SA of Paris
and Lucent Technologies Corp. of
Murray Hill, N.J.
Alcatel-Lucent's track record since the merger has been marred
by repeated sales and profit warnings, with executives
struggling to integrate the two firms as the market for telecom
equipment went through a period of intense change and price
wars. Chief Executive Officer Patricia Russo and Chairman
Serge Tchuruk have been criticized for the deteriorating
profitability of the firm, which has seen its market
capitalization halved since the merger.
Despite the continuing problems, Mr. Tchuruk sought to reassure
shareholders that the longer-term picture was bright. "The
board of your company remains confident because the telecoms
business contains a considerable margin for growth, which is
being masked by current market conditions," he said.
However, he acknowledged that the telecom-equipment sector was
"going through a new crisis" in which prices were falling
steeply, offsetting the gains in sales volume in recent years.
Alcatel-Lucent reaffirmed that its sales of telecom equipment
would be flat this year, because the economic slump is prompting
its major customers, telecom operators, to spend less to upgrade
Shareholders approved a resolution put forth by the company that
made it easier to remove Mr. Tchuruk and Ms. Russo.
Previously, the board had to have a two-thirds majority to
remove either of the top two executives -- a provision enacted
after the merger that was intended to ensure management
stability. Now, the board will go back to needing a simple
majority vote to remove the CEO or chairman.
Speculation over whether the resolution would bring about Ms.
Russo's exit has helped push Alcatel-Lucent's share price up
about 6.8% since the start of the week. But Ms. Russo has
consistently said she has no plans to leave.
"If half the board was just waiting for this resolution to vote
against me, I can assure you I'd have left a long time ago," Ms.
Russo said in an interview this week with French weekly
Analysts have noted that even a new CEO would struggle to fix
the structural issues facing the company. Shareholders,
some decidedly unhappy with the share-price performance,
peppered management with questions at the occasionally rowdy
meeting. Mohammed Karim Lahjouji, an individual
shareholder who said he had lost €100,000 ($155,000) as
Alcatel-Lucent's share price dropped, railed against the
management: "I don't understand your ethics, I don't
understand your performance. It's scandalous, I've had
Shareholders also approved a resolution linking Ms. Russo's
departure package to the company's performance. The
resolution calls for Ms. Russo to receive two years of
remuneration upon her departure, including fixed and variable
pay, and accelerates vesting of her stock options in the company
if Alcatel-Lucent meets certain targets.
Write to Jethro Mullen at
firstname.lastname@example.org and Leila Abboud at