Bring down the barriers

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Sep 4th 2008
From The Economist print edition

Ben Verwaayen’s talents will be sorely tested in his new role


AFTER Alcatel SA merged with Lucent Technologies Inc two years ago, almost the last thing the new company could afford to worry about was balancing the interests of its French and American parts. But although less than half of the combined group’s turnover comes from its home countries, Alcatel-Lucent failed to transcend its national origins. Two small, weak telecoms-equipment firms became one big, weak one, beset by low-cost competition from new Chinese rivals and struggling in a business that internet technology was changing beyond recognition. Worse, demand has been weakening across the industry. Appointing people on the basis of nationality rather than ability is never a good idea; in conditions like these, it spelled disaster.

Bloomberg

With Verwaayen, union at last?Cost savings either failed to materialise or were swallowed by falling prices; despite hacking 16,500 jobs from a workforce of 88,000, Alcatel-Lucent made losses for six consecutive quarters and its share price fell by more than half. At the end of July it said that Serge Tchuruk, its French chairman, and Patricia Russo, its American chief executive, would depart. This week their replacements were named: a French chairman, who lives in America, and a Dutch chief executive, who will be based in Paris. Both Philippe Camus and Ben Verwaayen have the personality and experience that could iron out the beleaguered telecoms group’s problems.

Mr Camus is an intense, softly spoken French polymath who first made his name with Lagardère, a family-owned industrial group. He forged and then successfully ran EADS, a clumsy Franco-German defence and aerospace group, alongside a German colleague, despite the thicket of rivalries and jealousies that covered it. Only after Mr Camus was squeezed out by the machinations of Noël Forgeard, the boss of Airbus, EADS’s civil-aviation subsidiary, did EADS and Airbus fall into the mess that still troubles them today.

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After that he headed for New York and Florida to join an American investment firm, though he keeps one foot in Paris, as a managing partner of the Lagardère group. Mr Camus’ experience managing the Franco-German rivalries at EADS and Airbus may help him steer Alcatel-Lucent away from its similar difficulties to become a proper global company.

For Mr Verwaayen, turning Alcatel-Lucent around will be an even taller order than his last trick—reviving BT. When he became chief executive in 2002, Britain’s leading phone company was on its knees, losing business to nimbler rivals and sweating under debts of £30 billion ($45 billion). Mr Verwaayen soon cut costs and set the company back on the road to profits, after taking the bold decision to sell off its mobile business. He resigned this year, feeling that he had accomplished his task.

Mr Verwaayen accepted the new job only when he found he could get along with Mr Camus, who had already agreed to be chairman. “We share the same sense of humour,” he says. “You need to have complete understanding at the top of the house.” Mr Verwaayen is famed for his presentational skills, always speaking effortlessly without notes or slides. Subordinates find him hard going at first, because of his informal but direct manner and his love of argument. He wants his new colleagues to stop fretting about the merger and focus instead on securing its supposed benefits by meeting customers’ future needs (for instance, with tailor-made services) rather than clinging to what worked in the past (simply covering the market with a wide range of hardware).

Before BT, the Dutchman—who is at ease in French as well as English—ran part of KPN, the Dutch phone company, and worked for Lucent in America. He reckons that his time as a customer will help him lead Alcatel-Lucent out of the shadows. He sees his job as removing barriers within the company and unleashing its talents. But perhaps his biggest advantage in rescuing a failed Franco-American merger is that he is neither French nor American.