Former BT man faces very different issues at Al-Lu
Alcatel-Lucent has named its replacement CEO for the departing Patricia Russo, and it has plumped for Ben Verwaayen, the man widely credited with picking BT up, dusting it down, and starting all over again back in 2002, when it looked like the debt-laden incumbent was heading for a messy break-up. Verwaayen will work for a board headed up by new non-exectuve chair Phillip Camus. His appointment means it is “close but no cigar” for Mike Quigley, a former ceo of Alcatel who was tipped by many for the job.
Whether Verwaayen can put on his top hat and tails to work similar magic at Alcatel-Lucent remains to be seen. Although at first sight the problems may be similar, because both are formerly dominant companies fallen on hard times – at BT, the man was faced with an incumbent telco saddled with debt and facing a present threat of reduced revenues from voice telephony – its core business. But of course there was action he could take – such as restructuring the debt, and more importantly the business, to allow BT to take advantage of IP technologies from a wholesale and retail level. And BT was the prime player in its market. It was slowly withering, certainly, but with some pruning and training, it soon grew back healthier and more verdant. More importantly, Verwaayen took over in 2002, on the end of the dotcom bust, but before DSL access was widespread. In other words, there was a market to aim for.
Will Mr Verwaayen be able to work this same trick at Alcatel-Lucent? The problem is, this is a company that has only recently smashed together two very different corporate cultures, with many people heading for the exits as it did so. There are still cultural issues, but even assuming Verwaayen can continue or redirect efforst here, is there the same obvious growth potential, if only the systemic issues can be sorted out? Well, that’s more problematic. What are the future opportunities facing Al-Lu? 4G, both WiMax and LTE, might be one. But WiMax has stalled, or at least is not looking like being of a scale to build a business on. And LTE investment is going to be on a much cannier level than operators sunk into 3G. Also, AL-Lu’s presence in 3G is minimal, and it would be naïve to think that 4G represents an entirely clean sheet of paper when it comes to winning contracts. There is still much 3G to be rolled out, of course. Especially in emerging markets. But here margins are very tight, and all the established players are under great competitive price pressure, led by Huawei and ZTE.
Verwaayen may also be able to focus the group away from its CDMA investment, a writedown on which contributed to the company’s sixth straight quarterly loss in July 2008. The second-quarter loss widened to 1.1 billion euros from 586 million euros a year earlier.
IPTV and mobile TV offer a third opportunity, and here Al-Lu has its own specific play, with the ownership of the DVB-SH version of the DVB-H standard.
So although Alcatel-Lucent is positioned right across the comms field, in both equipment and services, in fixed and wireless, and should be ideally placed to benefit from operators’ next generation networks and convergence strategies, it is far from obvious that the traditional telecoms players are indeed going to be the ones who benefit from those investments.
Al-Lu’s press release highlighted Verwaayen’s background both as a former management board member with Lucent, and his time spent with ITT, a company later rolled into Alcatel. Is this important? Probably not. His time at Lucent began over a decade ago and he was at ITT in the 1980s. The mention probably says more about the need to assuage internal politics within the company over which “side” Verwaayen will see things from. One of his first tasks, and one to which he is admirably suited, will be to stop that sort of thinking.