FROM THE LU THREAD:
Anybody who would want to take on LU would certainly require
balls of steel! Maybe ALA has the guy.....
<<<05/27/01
BY JOHN T. WARD
STAR-LEDGER STAFF
What might Lucent Technologies Inc. employees have to look forward to under an Alcatel regime?
Hard-nosed leadership -- for those Lucites who get to keep their jobs. They likely will be working for a no-nonsense executive with a proven record of turnarounds and a penchant for screaming at ill-prepared subordinates.
Even before he became Alcatel SA's chairman and chief executive in 1995, Serge Tchuruk had presided over ambitious restructurings of three lumbering French giants. At Paris-based Alcatel, he has shown little patience for indecision in paring away most of the 1,200 subsidiaries -- and a third of the 191,000 employees -- he inherited.
As talks continue, many analysts and investors have derided the idea of a merger of Alcatel and Murray Hill-based Lucent. They cite chaos at Lucent and slowing sales throughout the telecom gear industry.
Still, Lucent's $3.7 billion loss in the most recent quarter has made it garage-sale cheap and ripe pickings, perhaps, for Tchuruk. On the table is a "merger of equals" stock swap in which Alcatel would gain control of Lucent without paying a cent over Lucent's collapsed share price. Wall Street values Lucent at about $33 billion, down from $285 billion 18 months ago.
Getting a deal to work would present another huge challenge to an executive who has spent a career seeking them out. Adjectives used to describe Tchuruk include "pragmatic," "autocratic" and "ruthless." A French business publication referred to him as a "a cold and devoted industrialist."
The change in management could be a shift for Lucent employees used to the more team-oriented, soft-spoken approach of current Lucent Chairman and CEO Henry Schacht, a man one consultant described as "Gary Cooper at High Noon."
In Lucent, Tchuruk would face the daunting task of integrating a battered American giant into a former state-protected conglomerate -- and doing it at a time of plummeting equipment sales and widespread investor wariness.
But analyst Marjorie Saint-Aime of Pittsburg Institutional thinks an Alcatel grab for Lucent makes sense -- as long as Tchuruk is in charge. Though he's approaching 64, he is likely to stay at the helm, replacing Schacht, Lucent's founding CEO. Schacht was lured out of retirement to retake the wheel when Richard McGinn was fired last October. He has not designated a successor.
"Serge is well-known for turning around companies, and when he moved to Alcatel, he made it known worldwide," Saint-Aime said.
Alcatel officials in Paris did not respond to requests for an interview with Tchuruk.
Serge Tchurukdichian was born in 1937 in Marseilles, where his grandparents settled after fleeing violence against Armenians in Turkey. He changed his name to Tchuruk (pronounced cha-RUK) in 1991, formally adopting the moniker he started using in the 1970s.
Tchuruk was educated at the highly selective Ecole Polytechnique in Paris and hoped to make a career as a weapons engineer. But the French arms industry saw him as a Cold War security risk because of his 1960 marriage to the daughter of Polish refugees.
Starting in 1964, Tchuruk worked 15 years for Mobil Oil, including an 18-month stint at a petroleum research lab in Paulsboro.
Cy Meisel, a retired Mobil vice president who lives in Princeton, said Tchuruk made an indelible impression when they crossed paths at the company's French subsidiary.
"He's one of the brightest people I've ever met," Meisel said. "They had such a very high regard for him over there."
After Mobil, Tchuruk embarked on a spree of industrial turnarounds, starting at the fertilizer unit of Rhone-Poulenc SA in 1980, and ending in the early 1990s, when, as CEO of Total SA, he eliminated 200 subsidiaries and merged several companies to form the giant TotalFinaElf.
Alcatel was by far his biggest challenge. The company had been nationalized in 1982 -- it was then known Compagnie Generale d'Electricite -- and re-privatized in 1987, but had not shaken off the rust. The conglomerate owned hundreds of businesses, including a shipbuilding company, a 2 percent stake in Fiat, newspapers and even a Bordeaux vineyard.
It was also losing money. "The biggest and sickest" of its many subsidiaries was the telecommunications business, Tchuruk once told an interviewer.
Three months into Tchuruk's reign, heads began to roll. As part of a $2 billion restructuring, Alcatel slashed 40,000 jobs across Europe. That was en route to a full-year net loss of $5.1 billion, the biggest deficit ever posted by a French company.
Tchuruk said at the time that the job cuts were a "a question of survival." He also warned Alcatel would not return to "respectable" profits until 1998.
Over the next two years, Tchuruk shed Alsthom, a heavy-equipment maker, as well as the vineyards and publications. At the same time, Tchuruk started plotting how he could break into the booming U.S. market.
The push started in 1998 with DSC Communications Corp. of Texas -- a supplier of optical equipment one British publication said had "a specialty in profit warnings." Alcatel paid $4.4 billion in stock.
It was the right move at the right time.
The deal gave Alcatel a toehold for what has proven to be its biggest success in the United States -- digital subscriber line technology. DSL converts existing copper phone lines into pathways for simultaneous voice and Internet traffic so home users can surf the Web and gab on the phone at the same time.
Alcatel, as well as other manufacturers, had been developing DSL as a means of delivering video-on-demand, a market that never developed. But when U.S. phone carriers suddenly found their lines jammed with Internet users in the mid-1990s, equipment makers found themselves sitting on a gold mine.
Anticipating a market battle, Tchuruk directed his staff to come up with a low-cost DSL modem. Then he used DSC's relationships with the big local phone carriers as a platform to sell the gear. It worked. Alcatel now has 54 percent of the global DSL market, according to an industry estimate.
Alcatel's path hasn't been without potholes, though. A day after the DSC deal was finalized, the company surprised the markets with a profit warning of its own -- one that resulted in a 38 percent drop in its stock value that day. Officials blamed the downturn on fallout from the Asian and Russian economic crisis. Investors and analysts criticized the company for withholding information. Fidelity Investments dumped its sizable stake.
In response, a chastened Alcatel shifted to quarterly reporting of its financial performance, from semi-annual, and Tchuruk implemented new business-monitoring systems.
Meanwhile, Alcatel's western expansion went on ahead.
As it continued to shift away from traditional voice switching to broadband technologies, Alcatel last year spent $7.1 billion to buy Canada's Newbridge Networks. The maker of switches that deliver voice, data and video on a single network positioned Alcatel against the likes of Nortel, Cisco and Lucent in the global data networking battle. Now, a merger with Lucent would bolster Alcatel's fiber-optic and wireless portfolios in the United States.
Alcatel's makeover has been extensive. Telecom equipment last year represented 75 percent of $30 billion total sales, up from 40 percent in 1995. U.S. sales accounted for 22 percent of the total.
But the carnage isn't over. DSC saw 650 jobs slashed soon after Alcatel bought it. Last month, Alcatel said another 1,100 would go across its North American holdings, knocking employment down to 17,000.
Alcatel employs 131,000 worldwide, compared with Lucent's 90,000.
Alcatel has had "a very bumpy time" integrating the North American companies, said Bill Lesieur, an analyst at Technology Business Research in New Hampshire. In each case, he said, managers were promised they would be autonomous, and the acquired companies would be permitted to keep their existing company names.
"But within 60 days, they plowed through the companies, changed the names and brought in a very aggressive management style," Lesieur said.
But analyst Saint-Aime countered that getting Alcatel's name on the doors was the whole point of the deals -- to contribute to Tchuruk's aim of making the company a major player here and around the globe.
Tchuruk is reported to keep a low profile and relies on a small circle of executives -- who had better know what they're talking about. In a recent magazine profile, a high-ranking Alcatel executive said Tchuruk explodes at employees who make presentations he thinks are weak. A former colleague at Total said Tchuruk's underlings sometimes withhold information "because they're afraid of getting screamed at."
Tchuruk's transformation of Alcatel hasn't made it bulletproof.
The company ended 2000 with rising inventories and a falling share price, which is now down more than 60 percent since September. Late last month, company officials scaled back earnings projections for the year and announced cost reductions, including the outsourcing of cell phone production.
And even without having to put Lucent back on track, Alcatel foresees no immediate recovery on these shores. Chief Technical Officer Martin De Preycker told analysts in Spain last week that demand for optical backbone equipment in North America was slowing, following an already established weakening of switching equipment sales.
An upturn, he said, is at least two quarters away.
John T. Ward covers telecommunications. He may be reached at jward@starledger.com or (973) 392-4125.
nj.com.
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Namaste!
Jim |
