An American in Paris faces tricky adjustment

By Peggy Hollinger in Paris and Paul Taylor in New York

It may have been a slip of the tongue, but when Alcatel’s Serge Tchuruk said in French on Monday that his deal with Nortel would create a world leader in communications solutions, Patricia Russo, his proposed merger partner, looked a little startled.

The New Jersey-born head of Lucent, designated to become Alcatel’s first non-French chief executive when the two telecoms equipment vendors merge this year, may only have a high school acquaintance with the language, but even she was able to translate the Alcatel boss’s faux pas.

That may have given her confidence in insisting her lack of French would not pose a problem when she moves to Paris to run Alcatel. But the executive diplomatically avoided answering the question of how she would cope with running a French industrial icon through the country’s struggle to adjust to a globalised economy and popular suspicions of US-style capitalism.

“I think of it as a global company,” Ms Russo said. “I would hope the compelling logic, the value creation and the ability to create . . . a real powerhouse would transcend national issues.”

To be fair to Ms Russo, not having fluent French should not pose a big problem. Some 70 per cent of Alcatel employees are outside France, and English is widely used at its central Paris headquarters. And she is not the first foreigner to be proposed for the top job. Mike Quigley, the Australian chief operating officer, was brought back a year ago from North America as Mr Tchuruk’s previous heir apparent, in a sign Alcatel was more open than many had previously thought.

But there are still likely to be cultural differences. A good communicator, Ms Russo has a reputation for being frank, telling people the bad news as well as the good, and earlier rather than later. One of her strengths in turning Lucent round appears to have been her ability to do things quickly.

In much of Europe, however, things are done slower. Procedures particularly take time in France, especially when cutting 10 per cent of staff as Alcatel/Lucent intend. Restructuring plans must be presented to unions and legal processes followed. This could take up to a year. There is a danger Ms Russo could become frustrated if bureaucracy gets in the way.

Then there is the man who will be her chairman, the 68-year-old Mr Tchuruk. Perceived as a workaholic, no one who knows the Alcatel boss believes he is capable of retiring. On Monday he said he had been asked to stay on as chief executive beyond the June 1 deadline – when he was to step up to non-executive chairman – to see through the Lucent merger.

Mr Tchuruk will be non-executive chairman of the combined group, in charge of strategy. But whether he will be able to give Ms Russo the lead remains a question. In recent years he has parted ways with at least two potential successors, and his third – the highly regarded Mr Quigley – has also now been superseded.

People close to Mr Tchuruk deny there will be a conflict, saying he has had his eye on Ms Russo for some time. “I asked him two years ago whom he really wanted as a successor, assuming he could have anyone,” said one adviser, “and he told me he wanted Ms Russo.”

Whatever the future of their relationship, there are few who quibble with the industrial logic of bringing these two companies together to create the world’s second-largest telecoms equipment vendor with sales of €21bn ($25bn).

It bolsters each in its weaker areas and creates a world leader in the next generation networks that will bring together fixed and wireless communications.

Alcatel/Lucent will have an evenly balanced portfolio, both geographically and in product areas – a third each in North America, Europe and the rest of the world with an estimated 35 per cent of sales in fixed communications, a little more in mobile and roughly 30 per cent in private communications. It will be the world’s largest communications services group with estimated sales of almost €4bn, and the clear number one in the IMS architecture that will allow operators to offer more services based on the convergence of fixed and mobile systems. The two companies also claim they will command the biggest research and development budget in the industry of up to E2.9bn, with 26,100 R&D engineers.

Both Mr Tchuruk and Ms Russo clearly believe the companies will make a winning combination in a market facing pricing pressure and the demands of rapidly changing technology.

But for investors, the question might be whether their own personal combination will help take the group to first place or merely leave it without a captain.