The Comeback Kid

Pat Russo is far from an expert on wireless. Despite that, Lucent Techologies is relying on her guidance to build on its power position in the mobile industry.

Meet-and-greet topped Pat Russo's to-do list in her first weeks back at Lucent Technologies. The former high-ranking Lucent exec had just left her post as Kodak's CEO to take the top spot at the company where she cut her executive teeth. In the early part of her Lucent CEO tenure, Russo wasted no time getting in front of 12 key U.S. customers, including BellSouth and Verizon. Then she flew to Europe to address perceptions of Lucent's global participation and cement its commitment to eight major customers.

Her promise to wireless carrier customers: Lucent will talk less and do more.

Russo is known for backing up her words with action. That trait will come in handy as she gets to know the wireless sector, a group she hasn't worked with too closely before. Customers such as AT&T Wireless, Cingular and Verizon, which dominate Lucent's wireless contracts, have high expectations of Russo. They expect her not only to communicate Lucent's technology direction but to make sure the company delivers.

Most wireless carrier executives reserved on-the-record comment about Russo's return but agreed that the next six months would be revealing. This time frame is especially critical because carriers are beginning to roll out their new high-speed data capabilities (Verizon launched its 1XRTT network in February; AT&T Wireless and Cingular are transitioning their TDMA networks to GSM and GPRS), and Lucent's performance will be closely scrutinized.

“I want to make sure we are representing our total networking capabilities to our customers,” Russo said.

Telecom analyst Jeff Kagan said Russo's straight-shooting style serves her well for addressing wireless jitters. “Here's a golden opportunity for her to go into a phone booth and come out a superhero,” he said.

For the moment, Lucent sits atop mobile infrastructure sales, with nearly $10.6 billion announced contracts over the last 18 months, according to a Merrill Lynch report. Unfortunately, wireless carriers lost $25 billion in market capitalization in January, potentially stunting contract gains such as last March's staggering $5 billion deal with Verizon. Lucent will have to fight to hold its spot in 2002, a year that promises desperate competitors clawing for each dollar of business.

As tough as the market is, the timing is great for Russo's return, Kagan said. “You always want to come in after a company has hit bottom,” he said. “You don't want to catch a falling knife.”

While Russo may lack wireless experience, she's known as a quick study. An AT&T Wireless executive who formerly worked with Russo recalled a strategic presentation she delivered at a media briefing, after which she answered granular technology questions for 90 minutes. “She was good,” he said.

Russo doesn't consider herself a technologist. “The strength I bring is focus on the markets, on customers and making sure that we are applying the technical capabilities that we have in a way that makes a difference for customers.”

For specific wireless expertise, Russo turns to Jim Brewington, whom she called “one of the best in the industry” and “highly regarded by the customer set we serve.” Russo credited Brewington, president of the company's wireless network group, with developing Lucent's single platform architectural strategy. “It's a platform-based family — one base station that can support CDMA and UMTS. That's pretty significant,” Russo said.

Even with Brewington's wireless connection, questions still swirl about Lucent's wireless personnel cuts and the potential loss of intellectual capital. Russo insisted that the vendor needed to “downsize commensurate with the market opportunity.”

“Did we lose some talented people in that process? Of course,” Russo said. “Unfortunately we didn't have the work for them.” She hastened to add there's plenty of intellectual horsepower left to drive the strategy and execute the plans.

“Any time you lose an arm and a leg, it's hard to get around,” Kagan said about Lucent's cuts. But Lucent isn't alone; its wireless competitors have endured similar cuts. “Lucent and Nortel can weather this storm if they keep their costs low,” he said. “But if they get no contracts, they have no cash flow.

“A positive first quarter will be crucial. Her job will be to stabilize and grow in the first year,” Kagan added.

“It wasn't fun for her unless it was a tough assignment,” said Joe McCabe, who was Russo's chief financial officer for five years before joining AT&T Wireless as executive vice president and chief financial officer. Bringing Lucent back to profitability by the end of the year might be her toughest assignment yet.

An “absolutely” critical priority for Russo when she returned to Lucent was to address the company's employees. What would their reaction be to her return? Overwhelmingly positive: Russo received a standing ovation even before she spoke.

Current as well as former employees generally praise Russo, using adjectives like “polished,” “professional” and “passionate.” Even Internet message boards, usually a safe haven for airing true feelings, reflect contentment with Russo's appointment — and far more agitation with Nortel, a prime competitor.

One Lucent staffer characterized Russo's return as “reassuring, especially following the drama of the last year.” Another said Russo's sabbatical from the company provides her with a necessary detached objectivity to identify problems.

Although Wall Street analysts criticized Lucent for not bringing in an outsider, wireless analysts like Kagan said Lucent's internal credibility crisis coinciding with external turmoil demanded someone who knew the company from the inside. “Any time you slash your ranks by half, your stock performance goes in the toilet, and all else that Lucent has gone through in the last 12 months, there will be a crisis of faith,” Kagan said.

But Russo suffers no such crisis. She uses the word “absolutely” frequently. When she says it, she draws it out to the full measure of its four syllables. You can tell she means it. This emphasis, like her focus on customers and co-workers, brings reassurance after what has been a long, uncertain period.

Can Lucent get its sparkle back?

Yes, Russo insisted. “Ab-so-lute-ly.”