ALU board said to turn on CEO after poor Q3
Despite strong track record of returning the French giant to profit, investors reported to be considering replacement
Published: 21 November, 2011
The CEO's role can be a thankless one, as Alcatel-Lucent's chief Ben Verwaayen will be painfully aware this week. He may be one of the best rated CEOs in Europe, especially for his performance at British Telecom, and he may have wrenched the French giant out of a post-merger depression that many thought was permanent, but a eurozone crash and one disappointing quarter later, shareholders are already reported to be "losing patience".
According to a report in the Wall Street Journal, citing the usual unnamed sources, there is significant pressure on the company's board to replace Verwaayen, and even some informal overtures to potential replacement candidates. The reports were sufficiently noisy to prompt ALU's chairman Philippe Camus to issue a statement insisting that Verwaayen was an "extremely effective" leader, and adding: "In spite of challenging external economic conditions, he is continuing to deliver on the transformation. The board, myself and Ben are focused entirely on that task alone."
Over the past few quarters, sentiment about ALU has steadily improved as it delivered on most of the milestones set out by Verwaayen when he took the helm in 2008, outlining a radical plan to return the ailing infrastructure maker to profit with cost cutting, divestments of non-core businesses, and an increased focus on growth businesses like cloud services and 'Telco 2.0'. He did achieve profitability for the first time since the merger of Alcatel and Lucent, which was followed by a prolonged period of stagnation, internal disputes and culture clashes. Indeed, the firm outdid market forecasts for three quarters running - the last of fiscal 2010 and the first two in 2011 and in May Verwaayen said it was close to being a "normal company" again.
However, earlier this month ALU was forced to reduce its 2011 profit guidance while its third quarter revenue disappointed the markets. It has been hit by the crisis in the eurozone, one of its largest markets, rising competition from Chinese suppliers, and to some extent a slackening of networks spend by the big US cellcos, all of which have made ALU a primary partner in 4G and network modernization projects. That sector should pick up again, though, as AT&T's LTE build-out and Sprint's Network Vision accelerate, making up for Verizon's huge LTE deployment passing its peak.