August 23, 2007 / 2:33 PM / 10 years ago

Defections spell more turmoil for Alcatel-Lucent

PARIS, Aug 23 (Reuters) - The resignation of two top executives from Alcatel-Lucent ALU.PA spells more turmoil for the world’s second-largest supplier of telecoms equipment, which is already struggling with a complex and costly merger.

The first senior management changes since France’s Alcatel acquired U.S.-based Lucent in December come one month after merger costs and price pressures pushed the group into a bigger-than-expected quarterly loss.

Alcatel-Lucent ALU.N announced on Wednesday that Mike Quigley, president of science, technology and strategy, would leave to return to Australia.

Chief Administrative Officer Frank D‘Amelio will become the new chief financial officer of U.S. drugmaker Pfizer Inc. (PFE.N).

The $13.4 billion merger has already created uncertainty for clients and investors over the combined group’s future strategic technological choices.

“News that two of the merged company’s top executives have resigned can hardly enthuse investors in search of direction and stability after three quarters of derailment and turmoil,” said Dresdner Kleinwort analysts in a research note.

They said they expected further management defections.

The departure of Quigley -- once tipped to be chief executive of the French group -- was no surprise to analysts after he was passed over in favour of Pat Russo.

But that of D‘Amelio, who had been in charge of the group’s restructuring and will not be replaced, raised some eyebrows at a time when Alcatel-Lucent is implementing drastic job cuts.

D‘Amelio’s teams will now report to other senior executives, notably Christian Reinaudo and Janet Davidson.

Quigley’s position will be filled by Etienne Fouques, currently head of the carrier business segment. He will also oversee the services business, which will continue to be led by John Meyer.

GALLIC COUP?

    Nomura analyst Richard Windsor said he saw the appointment of Fouques as a demotion for Meyer, creating the risk Meyer could leave too.

    He noted that the reshuffle leaves all top operational posts in the hands of executives that have come from Alcatel, calling it a “coup d‘etat”.

    “This is not particularly negative for Alcatel-Lucent as we have long believed that Alcatel was a far better run company than Lucent,” he said.

    For CM-CIC analysts, the changes were “rather positive” because they meant simplifying the top management team.

    The growing influence of members of the former French Alcatel’s operational team could also reflect “a will to regain the upper hand after a difficult start to the merger”.

    By 1243 GMT, Alcatel-Lucent shares were up 1.12 percent at 8.15 euros, outperforming the European technology index .SX8P.

    The company reported a second-quarter adjusted operating loss of 19 million euros last month, which compared with a forecast profit of 67.8 million.

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