Alcatel Talks Up Its Prospects to Holders

PARIS -- Alcatel-Lucent tried to reassure restive shareholders at its annual meeting that its long-term growth prospects were strong, despite the competitive pressures buffeting the telecommunications-equipment sector.
Associated Press
Alcatel-Lucent's Patricia Russo, at Friday's meeting, doesn't plan to leave.
The meeting, held here Friday, was the second since the merger in late 2006 of Alcatel SA of Paris and Lucent Technologies Corp. of Murray Hill, N.J.
Alcatel-Lucent's track record since the merger has been marred by repeated sales and profit warnings, with executives struggling to integrate the two firms as the market for telecom equipment went through a period of intense change and price wars. Chief Executive Officer Patricia Russo and Chairman Serge Tchuruk have been criticized for the deteriorating profitability of the firm, which has seen its market capitalization halved since the merger.
Despite the continuing problems, Mr. Tchuruk sought to reassure shareholders that the longer-term picture was bright. "The board of your company remains confident because the telecoms business contains a considerable margin for growth, which is being masked by current market conditions," he said. However, he acknowledged that the telecom-equipment sector was "going through a new crisis" in which prices were falling steeply, offsetting the gains in sales volume in recent years.
Alcatel-Lucent reaffirmed that its sales of telecom equipment would be flat this year, because the economic slump is prompting its major customers, telecom operators, to spend less to upgrade networks.
Shareholders approved a resolution put forth by the company that made it easier to remove Mr. Tchuruk and Ms. Russo. Previously, the board had to have a two-thirds majority to remove either of the top two executives -- a provision enacted after the merger that was intended to ensure management stability. Now, the board will go back to needing a simple majority vote to remove the CEO or chairman.
Speculation over whether the resolution would bring about Ms. Russo's exit has helped push Alcatel-Lucent's share price up about 6.8% since the start of the week. But Ms. Russo has consistently said she has no plans to leave.
"If half the board was just waiting for this resolution to vote against me, I can assure you I'd have left a long time ago," Ms. Russo said in an interview this week with French weekly Challenges.
Analysts have noted that even a new CEO would struggle to fix the structural issues facing the company. Shareholders, some decidedly unhappy with the share-price performance, peppered management with questions at the occasionally rowdy meeting. Mohammed Karim Lahjouji, an individual shareholder who said he had lost €100,000 ($155,000) as Alcatel-Lucent's share price dropped, railed against the management: "I don't understand your ethics, I don't understand your performance. It's scandalous, I've had enough."
Shareholders also approved a resolution linking Ms. Russo's departure package to the company's performance. The resolution calls for Ms. Russo to receive two years of remuneration upon her departure, including fixed and variable pay, and accelerates vesting of her stock options in the company if Alcatel-Lucent meets certain targets.
Write to Jethro Mullen at jethro.mullen@dowjones.com and Leila Abboud at leila.abboud@wsj.com