The tech giant's CEO is impressed by Ireland's 'positive energy', writes Conor O'Clery
Lucent's global headquarters in rural New Jersey, just off Interstate 78, looks a bit like a university campus. Inside the brown-brick corporate offices, the atmosphere is hushed, almost academic, the only sound the hum of air-conditioning.
It was built in the heady days of the 1990s before the technology bubble burst, when the telecommunications equipment giant was worth hundreds of billions of dollars and the guy running it was able to build a golf course nearby with $45 million (€35 million) of Lucent's money.
Five years ago - almost to the day - Lucent's valuation peaked at $258 billion, about four times the GDP of Ireland in the same year. That was then.
Lucent lost a quarter of its value in one black morning as the techs went under, and today the company is a shadow of its former self.
In 2002 Lucent, which makes systems and software for communications, brought in an Italian-American with piercing, dark eyes and large gold earrings to rescue it from itself.
Patricia Russo, one of seven children, whose father was a doctor and whose mother was a homemaker, took over as CEO just as Lucent waded through a bloodbath that resulted in the elimination of 120,000 jobs, the vast bulk of its workforce.
Russo, who had been in at the start of Lucent but had jumped ship temporarily to Kodak, was faced with a near-impossible challenge. She would often cite Winston Churchill's words, "Never give in, never give in, never, never never." But she could have as easily adopted another Churchill quote: "I have nothing to offer but blood, toil, tears and sweat."
For 13 quarters, Lucent continued to bleed and the lay-offs and closures went on. The tide of the battle did not turn until the end of 2003. Since then, Lucent has had six straight quarters of profitability. How did she do it?
A lot of hard work has left her with little time for her golf game.
"The downturn in the industry was unprecedented, unpredicted, in terms of its depth and its duration," she says. "No one could see that it would be as bad as it was.
"It required by definition a level of adaptive thinking, flexibility and resilience that was unlike anything I'd ever been through."
She says she feels the job losses keenly.
"No one ever wants to have to make decisions that cause people to lose their jobs or cause benefit levels to change.
"We're all human beings and it certainly affects me personally and it's something that is very difficult. Having said that, we had no choice."
In the kind of downturn that the industry experienced, one had to "ensure that you weather the storm, that you survive," and this meant making difficult decisions.
"Everybody loses when you make those decisions," she says.
Spending in Lucent's market dropped by half in her first year as CEO. "We were faced with some tough calls. The good news is we weathered the storm and survived. Now we're focused on moving the business forward."
The downsizing came at a cost of much bitterness among former employees, many of whom had joined solid telephone companies that were absorbed into Lucent.
The Lucent Retirees' Organisation website is full of angry comments from pensioners whose benefits have been eroded, complaining about the doubling of compensation to top Lucent executives last year (Pat Russo's 2004 pay included $1.2 million in salary, a $2.95 million bonus, $4.8 million of restricted stock and a share purchase option valued at $4.6 million).
"We have had to alter some of the benefits on the pension side," Russo concedes. "But it is important to note, even with the changes we've made, on average every retiree gets about $6,400 a year of health care support." She says these numbers in the US are still "very very good".
The "adaptive thinking" to which Russo referred also meant completing the outsourcing of nearly all of Lucent's manufacturing to foreign firms, a process which Ireland benefited from.
"What brought Lucent to Ireland in the first place was a workforce of capable, well-educated folks," she says. "We acquired a company which had a hub there, which sort of validated our own view of that opportunity.
"Also, the tax incentives were very attractive as we were looking to figure out where to put critical operations to support our European operations."
Last month, Taoiseach Bertie Ahern opened Lucent's new Bell Labs research centre in Blanchardstown, created with €43 million in investments from the Government and Bell Labs. Its 40 researchers bring the number of Lucent employees in Ireland to just over 600.
While countries like India and China are attracting more American outsourcing, the investment in Bell Labs in Ireland was not an "either-or situation", she says.
Lucent is in China, India, Ireland, Poland and Brazil, because they have the resources and relationships it needs to tap into.
"In the case of Ireland, it's the university relationship, it's the academic connection, it's the collaborative work on areas of mutual interest to us," she says.
The Bell Labs investment in Ireland also arose from "an ongoing relationship that we had with the Government that resulted in us working together towards a proposal that I think is a win-win for both the company and the Irish."
Ireland also had a good climate for collaborative work, from a "put-your-operations-here" standpoint, and "good savvy on the part of the Government in realising what it takes to attract companies".
As for the future of Lucent in Ireland, "it depends, quite frankly, on our success there," she says, matter-of-factly. "If we continue to find value in the relationships and operations we have there, we'll continue to invest."
Russo has been to Ireland a couple of times and likes the positive energy she finds here.
"When I've engaged with our folks there, you have a good feeling, a positive feeling, an encouraging feeling," she says.
It was not so different from the US in the friendliness of the people and the way people reacted and interacted "makes you feel like you're closer to home than you really are".
On her last trip a year ago, she says she didn't detect any of the anti-Americanism some US executives have complained about.
While hesitating to describe herself as a republican, she says she supports the party of US president George Bush for its principles of less government, business-friendly environment and supporting democracy around the world. She sees President Bush as "a guy who is very clear about what he believes in, has the courage of his convictions, says what he thinks".
Lucent's share of the worldwide cellular market has dropped from 14 to 12 per cent under her watch, because analysts say Lucent decided to abandon the European wireless standard.
Russo argues that her company has been a leader in advocating and advancing 3G technology - bringing to mobile phones high-resolution colour displays, polyphonic sound and video cameras, and the ability to stream or download audio and video content.
The EV-DO high-speed data deployed in the US networks was ahead of 3G deployment in European networks, she maintains.
"So for us, the North American market has been ahead with respect to 3G adoption."
She says Europe took longer for 3G to be decided upon or deployed due to technology delays and a lack of investment capability coming off very high-priced 3G licences.
With this revolution in wireless technology would fixed lines become a thing of the past?
"No," she replies. "Behind all these wireless networks, there's lots of fixed lines, fibre optics carrying all this traffic."
There was no question but that there was more emphasis on creating portable, mobile and flexible kinds of network capabilities.
"And that will continue, but behind those networks there's lots of fixed lines," she says.
Old-fashioned telephone wires are here to stay, it seems, until a fourth generation of technology comes along, the next big thing.
Factfile
Name: Patricia Russo.
Post: Global chairman and chief executive, Lucent Technologies.
Background: One of Lucent's founding executives, she helped launch the company in 1996. As Lucent's CEO since January 2002, she led the company through one of the most challenging periods in the telecom industry's history.
Russo spent eight years in sales and marketing at IBM before joining AT&T in 1981. She served as president and chief operating officer at Eastman Kodak Company before returning to Lucent in 2002.Russo graduated from Georgetown University and completed the Advanced Management Programme at Harvard University in 1989.
Family: Married with two stepchildren.
Hobbies and interests: Golf.
Why is she in the news: Lucent has just opened its new €43 million Bell Labs research centre in Blanchardstown. She is also speaking at the Irish Management Institute conference, taking place at Druid's Glen on April 21st-22nd.
