|
Not the same old Lucent?
|
 |
January 7, 2002: 5:39 p.m. ET
Wall Street dismissed the news of Lucent’s CEO hiring. But Patricia Russo might be just what the company needs.
By Staff Writer Paul R. La Monica
|
NEW YORK (CNN/Money) - Lucent chairman Henry Schacht must be starting to feel like the boy in the fairy tale who cried wolf once too often.
No matter what he has to say about how the troubled telecom-equipment company is recovering, investors turn a deaf ear to it all. "Comeback? We've heard that story before," is what the market always seems to say.
After all, how else to explain Wall Street's lackluster response to Lucent's latest news: the hiring of former executive Patricia Russo as its new CEO? Shares of Lucent (LU: down $0.15 to $6.95, Research, Estimates) actually fell slightly on Monday and only one analyst upgraded the stock. It was as if nothing changed for Lucent.
Well, it may be premature to predict a renaissance for Lucent just yet. But it seems like Wall Street may be wrong to totally discount Russo's hiring.
"The lack of an heir apparent meant that nobody was interested in the stock. At least now there is a catalyst for more upside than before," says Arnold Berman, chief technology strategist for Soundview Technology Group.
Guilt by association
One cause for concern is Russo's resume. Although she spent nearly twenty years in positions at AT&T and Lucent and was widely praised for leading the division that sells networking equipment to large telephone carrier customers like Verizon and SBC Communications, some critics thought that Lucent should have hired someone with no ties to the company, as opposed to an executive that served under Richard McGinn, the former Lucent CEO who presided over Lucent's collapse in 2000.
"Investors were hoping for some white knight to pop in and save Lucent," says Pip Coburn, global technology strategist for UBS Warburg.
But telecom industry insiders say that it's unfair to blame Russo for Lucent's big blowup. Jeffrey Kagan, an independent telecom industry analyst based in Atlanta, says that Russo, along with Nina Aversano, Lucent's former head of North American sales, actively cautioned McGinn about overaggressive sales targets. Aversano left Lucent in October 2000 and subsequently filed a suit against Lucent, alleging that McGinn imposed unrealistic sales goals on the staff.
"Russo has an intimate understanding of the problems and potential for Lucent. She watched it all unfold," Kagan says. "If someone came from the outside they could make the same mistakes but someone from the inside wouldn't have a fresh enough approach. She's the perfect choice because she has inside knowledge, in addition to the new perspective that you get when you go away."
Ideal qualifications, tough environment
Russo is joining Lucent at a time when much of the dirty work has already been done by Schacht. Layoffs have cut Lucent's work force nearly in half and the company has sold off non-core assets and spun off Avaya and Agere Systems. Berman says that means Russo's main task will be to focus the company on innovation, rather than restructuring.
And Russo has been praised for her technological acumen. In fact, shares of the company Russo is leaving, Kodak, fell 3.3 percent on the news of her departure. Russo joined Kodak (EK: down $0.95 to $27.94, Research, Estimates) as COO last April and was widely hailed as being a tech-savvy executive that could help lead the film giant into the digital era. One would think that Kodak's loss would be Lucent's gain but the market inexplicably treated the news as a lose-lose situation.
Lucent's stock has been essentially flat since July and the company is expected to lose 62 cents a share in the current fiscal year, which ends in September. Still, the stock has gained some new fans in recent months on the belief that fundamentals can't get much worse. Bill Miller, manager of the Legg Mason Value Trust Fund, for example, has been a buyer of the stock as of late. And Berman says that Lucent will likely emerge from the telecom slump before Nortel since it is starting to once again focus on new products.
Of course the big wild card is the economy. If telecom carriers start spending again, then that will obviously benefit Lucent as well as the rest of the networking industry. Until that happens though, Russo's job certainly won't be an easy one. 
|
|
|
|
|
 |
|
