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Alcatel-Lucent CEO Ben Verwaayen is paying the price for the networking equipment maker’s continued struggles under his four-year tenure, despite a series of moves designed to cut costs and stabilize the company.
Alcatel-Lucent announced Feb. 7 that Verwaayen is stepping down as CEO once a replacement is found. The announcement came the same day that the company announced that it lost $1.81 billion in the fourth quarter of 2012, and that revenue fell by 1.3 percent over the same period in 2011.
The poor financial numbers were just another blow to a company that was created in 2006 with the merger of Alcatel of France and U.S.-based Lucent. Proponents of the merger expected that it would create a massive company that could compete against the giants in the industry, from Cisco Systems to Ericsson to Nokia Siemens.
However, what resulted was a large, unwieldy company with a host of products lines. Alcatel-Lucent also was created just before the global recession set in, which forced businesses to cut back on their IT spending, including networking. That spending has yet to come back to full strength, as shown by the recent financial numbers of such other networking technology vendors.
Under Verwaayen’s leadership, the company has undertaken a number of efforts to turn the company around, all with varying degrees of success. Most recently, the company announced last summer that it was cutting another 5,000 jobs from its 78,000-strong work force as part of a larger plan to slash $1.5 billion in costs by the end of this year. At the time, Verwaayen and other executives pointed to weakening demand for its products and a competitive market that includes such rivals as China-based Huawei Technologies and Ericsson as primary reasons for the company’s continued struggles.
Other parts of the turnaround plan included exiting underperforming markets and trying to wring more profits from its patent portfolio.
Alcatel-Lucent posted its first profitable year since the merger in 2011, but 2012 didn’t bring with it similar results, despite optimistic forecasts from executives early in the year.
During a conference call with analysts and journalists Feb. 7 to discuss the financial numbers, Verwaayen said he approached the board of directors with the idea of stepping down, saying Alcatel-Lucent needed new leadership for the next phase.
“So that means that I have said to the board, it’s time for change,” he said, adding that he plans to stay active with the company until his successor is found. “There is no time for lame duck, period as I made it very, very clear, internally and externally. There is not time for that. We are going to execute. We are going to execute whether I am here or not. We are going to execute this plan because this is the plan, this is the commitment that we made to the market.”
Board Chairman Philippe Camus said the company has created a search committee to find Verwaayen’s successor.
“Over the last few years, Ben has set a new direction, created one company out of two, and has recently seen through the completion of the stabilization of the company’s balance sheet, enabling us to move forward with confidence,” Camus said in a statement.
Finding a successor may not be so easy, according to reports. The challenge is not only finding an executive with the skills to lead the embattled company back to profitability, but convincing that person to take the job, according to a Feb. 7 report in The Wall Street Journal. The board not only is committed to Alcatel-Lucent’s plans, but also is bound by promises made to banks as part of an emergency loan program from last year, according to the report.
A Bloomberg report echoed the sentiment.
“The next chief executive needs to be an ace French politician as much as a great CEO,” Mark Hawtin, head of investments at GAM U.K., which manages about $60 billion, told Bloomberg. “Alcatel’s future is a big and difficult problem because it’s the fusion of two national assets, with national security interests involved as well as French labor laws.”