Fiorina's HP win is a loss for Lucent

Hewlett-Packard gains a new CEO, but Lucent loses a key executive instrumental in pushing its global service provider business to more than $20 billion in annual revenue.

3 min read
Hewlett-Packard may have gained a CEO, but Lucent Technologies has lost a key executive instrumental in pushing its global service provider business to more than $20 billion in annual revenue.

In the wake of Carleton (Carly) Fiorina's departure as president of Lucent's service provider division, the company said it may institute some changes as it continues to look at the best way to structure its business.

Earlier today, computer giant Hewlett-Packard named Fiorina, 44, its new president and chief executive officer.

This morning, the market reacted sharply to Fiorina's departure. Shares in Lucent slid 2.1875 to 76.25 on 6.7 million shares.

Lucent has been continually finding ways to enhance its business model, said Bill Price, a spokesman for the company. Without mentioning specifics, Price added that instead of searching for a replacement for Fiorina, the company may consider realigning some of its businesses.

For now, operating chief Ben Verwaayen will assume Fiorina's direct responsibilities, overseeing a business unit that constitutes two-thirds of Lucent's total revenue, Price said.

While Lucent could reorganize, Lehman Brothers' analyst Stephen Levy believes Lucent will most likely find a replacement for Fiorina, and that her replacement will probably be someone from inside the firm. "Lucent isn't going to readjust its business just because one executive leaves," he said.

While some analysts say they're uncertain whether Lucent will find an official replacement for Fiorina, they affirm that the company experienced a major loss with her departure.

Levy said that for Fiorina, the decision to leave Lucent made sense.

"In general, the Lucent management team is pretty deep," said Levy. "There were probably at least one or two other executives ahead of her to take [Lucent CEO] Rich McGinn's job, so at the tender age of 44, to get a chance to be a CEO or a president of one of the largest technology companies in the world, it seems to make sense."

In morning notes, Goldman Sachs analyst Mary Henry said that while this will clearly be seen as a loss for Lucent, she expects a "smooth transition to an eventual realignment."

Henry noted that Fiorina was "widely viewed" as one of the candidates to succeed CEO McGinn someday. Yet the chance to run HP, a company with a market cap of $120 billion, was "clearly compelling," she added.

In a conference call earlier today, Fiorina said that she'd like to see a relationship strengthen between HP and Lucent, and that "like all great companies, Lucent Technologies will go on."

"I will say that leaving Lucent was an extraordinarily difficult decision, but I believe HP is a unique company at a unique and pivotal point in its history," she told reporters and analysts. "I think that together with the people of HP, we will have a very exciting journey over the next several years."

Prior to joining HP, Fiorina spent nearly 20 years at AT&T and Lucent. As president of Lucent's global service provider business over the past two years, the unit has grown, rapidly expanded its international revenue, and gained market share in every region across its product lines, HP said.

Prior to Lucent, Fiorina held a number of senior positions at AT&T where she began her career as an account executive.

Lucent's Price said that the company has realigned its business in the past to focus on different strategies and that there still is that possibility for realignment. In terms of the global services provider business, "right now, Ben [Verwaayen] will keep our feet to the fire," he said.