Lucent Loses Managers at Optical Unit to Rivals as Shares Fall
Murray Hill, New Jersey, April 17 (Bloomberg) -- Lucent Technologies Inc., the world's No. 1 phone-equipment maker, has lost seven key managers since February at its fiber-optic components unit, departures that analysts say could hurt it.
The unit, called Optoelectronics, makes the lasers, modulators and devices that beam voice and data traffic on fiber networks. Its only three managers who reported to President Dan DiLeo retired or quit, leaving him with no lieutenants. Three other executives left for rivals. Another is between jobs.
Lucent is relying on fiber optics to revitalize its profit and revenue growth as sales of traditional phone switches and software slow. The departures could make it harder to develop new products and boost sales to compete with JDS Uniphase Corp. and Nortel Networks Corp.
``Lucent has always had some of the very top people in the industry,' said analyst Lynn Hutcheson of Ryan Hankin Kent Inc., a South San Francisco-based market researcher. ``Now they're losing those guys. That's definitely going to have a negative impact on the business.'
The spate of departures is a change for Optoelectronics, a division of Lucent's Microelectronics Group that employs 2,000, mostly in manufacturing. The unit, based in Breinigsville, Pennsylvania, had a turnover rate of 4 percent in the past six months and lost no senior managers last year.
While job-hopping isn't unusual at a time of record-low unemployment, the situation at Optoelectronics stands out in the industry.
``It's happening a lot faster there than at any other company I've seen in recent months,' said Steven Storey, a recruiter with Equate in Sheffield, U.K., who specializes in fiber optics.
Filling Slots
Lucent is confident it can weather the losses. The company has filled six of the seven open management slots at Optoelectronics with internal candidates and DiLeo has held a series of staff meetings to answer questions and reassure employees that sales prospects are good.
``We've lost some people, but that's to be expected in a hot industry,' said Lucent spokesman Jeff Baum. ``Our bench strength allows us to quickly fill any holes.'
DiLeo also is creating five management jobs to handle the unit's sales, which he expects to rise at least 80 percent this fiscal year to more than $1 billion.
Hutcheson, the Ryan Hankin Kent analyst, said it could be a few months before the departures have an effect on Lucent's business. A bigger problem may be stemming the tide.
``The loss of key people obviously has to make others wonder if it's the best place to work,' Hutcheson said. ``They're not going to get wealthy working at Lucent.'
Shares of Lucent have fallen 11 percent in the past year and 24 percent since Jan. 6, when the Murray Hill, New Jersey-based company said first-quarter profit fell short of expectations and warned of a similar disappointment in the second quarter.
JDS Uniphase, whose shares have climbed almost fivefold in the past year, hasn't lost any senior managers in recent weeks, said Chief Financial Officer Tony Muller. JDS Uniphase is the biggest maker of parts used in fiber-optic networks.
``People have seen the stock go up way too much to think about leaving before their options vest,' said Ed Mackauf of Silicon Valley recruiter Lefeber & Associates.
Nortel hasn't ``suffered any significant depletion of staff' in its components unit, which is almost as big as Lucent's, spokesman Jeff Ferry said. Its stock has more than doubled in the past year.
Erasing Compensation
Lucent's stock drop not only slashed the paper value of any options Lucent had issued at lower prices, it left any options issued at higher prices worth nothing.
The point wasn't lost on recruiters. Conrad Burke, who quit as director of marketing at Optoelectronics in March to join San Diego startup Optical Micro-Machines Inc., said he started to get more calls from headhunters after the profit warning and eventually gave in.
Equate's Storey said he talks with at least one Lucent employee a day who's thinking about leaving.
Chris Lepiane, a director of component sales at the Microelectronics Group, also joined Optical Micro, as did engineer Ken Falta and Bell Labs researcher Joe Ford. Kevin Hadley, in charge of internal sales to Lucent's fiber-optic networking unit, was hired by rival SDL Inc.
Startups are offering at least 10,000 stock options to hire directors of sales or marketing on top of base salaries as high as $140,000, recruiter Mackauf said.
When those companies go public, the options can be worth millions of dollars if the shares soar. That was the case with Sycamore Networks Inc., Avanex Corp. and E-Tek Dynamics Inc. before last week's plunge in U.S. stock markets.
Tim Hays, a product manager for lasers and fiber-optic transmitters, left Lucent in late February for a more senior job as co-head of marketing with New Focus Inc., a Santa Clara, California-based startup that's filed to sell 5.75 million shares at $16 apiece. He'd been at Lucent only 18 months.
``I wanted to have more influence over the success of the business,' he said. ``In a big company, years of service play a bigger role in climbing the corporate ladder.'
Biggest Loss
Lucent's biggest loss in terms of seniority was Anders Olsson, a pioneer in fiber optics and vice president of marketing. Olsson, who's worked at Lucent more than 15 years, declined to comment on why he left or where he may go.
His departure may be the costliest. Lucent is quadrupling its production of fiber-optic components this year to compete with JDS Uniphase and Nortel.
``Anders has been in the industry since the beginning,' said Hutcheson. ``Losing someone with that kind of knowledge is huge.'
Mel Dixon, a director of technology planning and ventures who'd been at Lucent for 32 years, and Tim Bock, director of manufacturing and process development, retired.
Among the other departures were Ed Coringrato, senior development of planning, business development and operations, and Sung Joon Kim, senior manager of transponder marketing and product development based in Huntington Beach, California.
Dan Tyman, a director at Lucent's Optical Networking Group in charge of manufacturing equipment that boosts the capacity of fiber-optic networks, left to join Cisco Systems Inc.
``Lucent had better start putting its fingers in the dike,' said CIBC World Markets Inc. analyst Jim Jungjohann. ``A company is only as good as its last hire.'
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