Stirring Lucent from its funk

Lucent Technologies hopes its road to recovery just got shorter with the rehiring of Patricia Russo--a high-ranking executive who left the company nine months ago--as its new chief executive.

Some analysts lamented what they said was a lost opportunity to bring in outside blood and reinvigorate the company, but many still applauded the appointment of Russo as a sound move. Because Russo already knows the ropes, they said, she'll quickly get accustomed to her old digs.

With the clock ticking and Lucent continuing its rebuilding efforts, a smooth transition is a critical factor at this juncture in the company's brief history, analysts said.

Russo takes the reins at a Lucent that barely resembles the communications powerhouse she knew before departing for Eastman Kodak in 2000.

When the bubble burst in 2001, Lucent, along with rivals such as Nortel Networks and Cisco Systems, suffered the consequences--and they were not pretty. Lucent underwent a massive restructuring that involved the firing of tens of thousands of people, and it has since struggled with further losses.

The company has now shifted gears: Rather than providing a wide array of gear and components to the industry, it's now focused on a select number of service provider customers.

Russo, 49, is a 19-year veteran of Lucent who succeeds CEO Henry Schacht, 67. Schacht will remain as chairman for an undetermined period.

In between meetings with employees and customers during her first week on the job, Russo took time out to discuss with CNET News.com her position as CEO of a newly beleaguered company.

Q: What are your thoughts on returning to Lucent?
A: It's truly a unique opportunity for me. It's been a job I've been preparing for my entire career, so I'm just delighted to have the opportunity to lead this company. We have a very credible plan, and the team has been executing toward a turnaround.

The company you now join is in a far different predicament than the company you left. How do you view it? And what is different about it?
This company has gone through some gut-wrenching change, of course, with the layoffs. But an awful lot of progress has been made with respect to streamlining the operations, sharpening and focusing their strategy, creating new business models, all aimed at getting the business back to profitability.

What else, in your view?
A significant effort was taken to resize the business commensurate with the industry and the market opportunity. I would say there's been an awful lot of awfully good work done. I think it was a year ago that the company was losing $1.2 billion, and in the corresponding quarter a year later, minus $200 million--so tremendous progress in a really tough industry.

A big job for anyone, no?

Now, I'm not naive about the work that is yet to be done: We've got to execute on the plan that's in place; we've got to be sharp about where to put our resources...But one should not discount the incredible progress and the important steps this leadership team in this company has taken over the past year and a half.

As an executive from the Rich McGinn era, what did you learn from the things that were exposed during his tenure, like the accounting practices, etc.?
First of all, I left a few months before those accounting errors came to light. More broadly, I certainly want to run the company with the integrity that it should be run with and that our employees and customers expect. There were some things that went on that, in retrospect, maybe weren't in the best interests of the company, but I think we have the right plan in place to execute on a turnaround.

How will you put your own stamp on the company?
This is an industry that is going to continue to move through changes, and it's important to have the right strategy--be the best at serving customers and have your financials in order. I hope to restore the luster and pride that employees and customers should have in Lucent, and I think we have the capability of doing that. Performance is what counts.

Have we hit the bottom of the telecom downturn?
It's hard to say when it will come back. There's no question the industry has been digesting the bubble that we saw in 1999 and 2000, when unsustainable levels of spending occurred. So there is some uncertainty as to when the industry will recover to its normal pace.

What does it depend on?
It depends, in part, on when you believe the industry has digested the effects of this bubble. Lucent has said that, going forward, its quarterly performance would be better. That would suggest some sort of bottom. Having said that, it's too soon to tell, and I wouldn't want to predict it at this point. Over the long term, this is...an essential industry at the core of the global economy. It can grow at 10 percent to 12 percent rates once it regains its health.