Telecommunications equipment maker Lucent Technologies Inc. Monday named Eastman Kodak Co.'s president and chief operating officer, Patricia Russo, as chief executive, bringing back a former executive to complete its turnaround.
Russo, 49, succeeds Henry Schacht, 67, who will remain chairman of Lucent, which is in the midst of a wrenching restructuring that has brought tens of thousands of job cuts and a battling a prolonged telecommunications market slump.
She joins Hewlett-Packard Co. CEO Carly Fiorina, another former Lucent executive, as one of the few women running a large corporation. Fiorina is in the midst of a campaign to win investor approval for a proposed merger with Compaq Computer Corp. , a move opposed by the heirs of the Packard and Hewlett families.
Despite Russo's experience with the company and industry, some analysts expressed concern about the hiring of a former Lucent executive.
"What they've got with Pat is another lifer," said one analyst, who asked not to be identified. "I view this as a lost opportunity to bring in some new management. For the long-term health of this company they need an infusion of outside views, outside experiences and frankly Pat does not bring that."
"She's being brought in to implement the plan," the analyst added. "That's what Henry wanted. He didn't want somebody to come in and shake up the place."
Russo worked at Murray Hill, N.J.-based Lucent and AT&T Corp. for about 20 years before joining photography giant Kodak in April as president and chief operating officer, where she helped oversee that company's restructuring program.
Lucent, which was spun off by long-distance telephone giant AT&T in 1996, has slashed its work force to about 77,000 from 106,000 and plans to further reduce that number to as low as 57,000. It also posted a multibillion-dollar loss during fiscal 2001, eliminated money-losing or low-profit product lines and sold non-core businesses.
RUSSO CAN 'HIT THE GROUND RUNNING'
However, one investor viewed Russo's ascension favorably.
"We had bought into Lucent's restructuring and future vision for the company, and I think it's helpful to have somebody who can hit the ground running with no learning curve," said David Katz, chief investment officer of Matrix Asset Advisors, a New York-based investment management firm.
"Lucent's top management ... (has) slashed the company's employee roster, jettisoned a number of divisions, and are restructuring, so nothing is sacred at the company," added Katz, who has bought about 100,000 Lucent shares over the last month and owns more than 1.18 million shares. "It's not a question where a person is going into a stodgy company that's not willing to accept that the world has changed."
Last month, Lucent warned its fiscal first-quarter loss would be larger than Wall Street was expecting because of the prolonged slump in capital spending by telecom customers.
Schacht told CNBC Monday morning that nothing has changed since then, when Lucent said the first quarter would be the low point of the market downturn for its revenues. Lucent has said it will return to profitability in its 2002 fiscal year.
"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.
Schacht said he would remain as chairman for an undetermined interim period that he did not envision being any longer than a year.
"Henry and the team have put in place and are implementing a solid, credible plan for turning this business around," Russo said.
FONDLY REMEMBERED AT AVAYA
During her time at AT&T and Lucent, Russo led the core business that served large telephone carriers as well as the restructuring of Lucent's then second-largest business that is now Avaya Inc., which makes technology for operator call centers and cabling systems for corporate campuses.
Before joining AT&T in 1981, Russo spent eight years in sales and marketing management at IBM, and she currently serves as the nonexecutive chairman of Avaya, where she remains popular.
"A lot of people who have been in this part of the business for a while, the worker bees, remember her well," said an Avaya employee who asked not to be identified.
Lucent's stock closed Friday at $7.10 in trading on the New York Stock Exchange, and has fallen about 47 percent since the beginning of last year, when it launched its restructuring. In the same period, it has underperformed its peers in the Standard and Poor's Communications Equipment Index by about 5 percent.
Kodak, a major player in photographic film, said Russo's duties would be taken over by Chairman and CEO Daniel Carp. It said it will begin a search for a new senior manager.
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