Chairwoman, president, and chief executive officer, Lucent Technologies
Born: 1953, in Trenton, New Jersey.
Education: Georgetown University, BS; Harvard Business School, Advanced Management Program, 1989.
Family: Daughter of a physician and homemaker; married; stepchildren: two.
Career: IBM Corporation, 1973–1981, sales and marketing management; AT&T, 1981–1992, management and executive positions in strategic planning, marketing, human resources, and operations; 1992–1996, president of AT&T's Business Communications Systems unit; Lucent Technologies, 1997–1999, executive vice president of corporate operations; 1999–2000, executive vice president and CEO of Service Provider Networks Group; Eastman Kodak, 2001, president and COO; Lucent Technologies, 2002–, chairwoman and CEO.
Awards: 50 Most Powerful Women in American Business, Fortune , 1998, 1999, 2001.
Address: Lucent Technologies, 600 Mountain Avenue, Murray Hill, New Jersey 07974; http://www.lucent.com.
■ Patricia Russo rose through the ranks of the telecommunications giant AT&T and helped launch its spin-off company, Lucent Technologies. Lucent developed into a leading supplier of communications hardware, software, and services, riding the telecommunications boom of the late 1990s. When the telecom bubble burst, Russo left Lucent to take the number two spot at Eastman Kodak. Her reign there was short; in less than a year she returned to tend to the beleaguered Lucent. After taking over as president and CEO, she resolutely cut costs and trimmed staff in order to improve the company's financial outlook and restore consumer confidence.
Reporters and colleagues alternately described Russo as conservative and dynamic. In the Calgary Herald she said of herself, "I'm deliberate, and I believe in letting people who
have a stake in things weigh in. But I wouldn't call that cautious; I'll make the decisions we need to make" (June 16, 2003).
Russo grew up in a large middle-class family in a New Jersey suburb. A natural athlete, she was cocaptain of her high school basketball team and captain of the cheerleading squad. After graduating from Georgetown University with a degree in political science and history, she joined the sales and marketing department at International Business Machines (IBM). She was there for eight years and eventually rose to the position of marketing manager.
Even when she was just starting out in the business world, Russo dared to tread on territory where few women had ventured. When she joined IBM, she was one of the only women selling mainframes. "Early in my career there were some people who didn't believe a woman belonged in sales," she told BusinessWeek ; "but I worked hard on the accounts I was given and made sure I met the customers' needs and focused on producing results for the company. What I found is that results matter—it's hard to argue with them. People who produce results rise to the top" (May 29, 2003).
Russo was hired by AT&T in 1981 and quickly began moving up within the ranks of the sales and marketing departments. In 1992 she was called upon to overhaul the company's struggling Global Business Communications Systems. She focused the division's efforts on voice systems, improved its core products, cut costs, and spurred overseas expansion. Through these efforts she was able to stem huge financial losses and boost revenues by 43 percent, to $5.7 billion, transforming the unit from a money bleeder into a clear profit maker.
Russo was still with AT&T when the telecommunications giant decided to spin-off its equipment division in 1996; Lucent Technologies was born. In 1999 she became executive vice president and chairwoman of Lucent's $24 billion Service Provider Networks Group, a position that placed Russo in charge of 80,000 employees.
Although Russo's career was going strong, her company would soon face rough roads. In 2000 Lucent began a sharp downturn; telecommunications spending had dropped, and the company's sales and stock prices suffered as a result. Most of the blame for the company's troubles was placed on the CEO Richard McGinn. To stop the bleeding, he began to spin off Lucent divisions; in the end virtually all that was left was Russo's Service Provider Networks, which McGinn brought under the corporate umbrella, essentially squeezing Russo out. Experts say her reduced role, the constant infighting between McGinn and his staff, and McGinn's questionable accounting practices (he allegedly reported revenue on sales that were not final) ultimately drove Russo out the door in August 2000.
Russo enjoyed a brief period of time off, painting and catching up on sleep. In April 2001 she found herself back on the corporate fast track when Eastman Kodak wooed her to its Rochester, New York, headquarters with the offer of its number two slot. She became president and chief operating officer, the highest position ever attained by a woman at that company. Management hired her because of her track record and because it was hoped her technological expertise would help Kodak modernize from film to digital imaging. The chairman Daniel Carp said in BusinessWeek that she brought skills to exactly where the company needed them—"right in the sweet spot" (April 23, 2001). She was charged with helping the film and photo company integrate its imaging products with the latest technologies, overseeing the day-to-day functions of the operating divisions, and seeking out new business opportunities.
While Russo tended to Kodak, her former employer was ailing. Excess network capacity left over from the Internet boom combined with lagging consumer demand were taking their toll on the telecom industry as a whole. Lucent's customers—telephone and wireless companies—were themselves suffering from slow sales and as a result cut back on their equipment purchases. In 2001 Lucent reported a $16.2 billion net loss; the value of its stock had fallen nearly 50 percent within a single year. Lucent management was in a state of upheaval. McGinn had been let go in October 2000, with Henry Schacht serving as interim CEO and trying to find a replacement. He eventually turned his attention to Russo.
Less than one year after she had left, Russo returned to Lucent, taking over as CEO on January 7, 2002; she asked Schacht to stay on as her senior advisor. She was reportedly lured back with an attractive compensation package: a $1.2 million salary plus a $1.8 million bonus package and 4.7 million stock options. When she returned, she told the Associated Press, "It's like coming home" (January 8, 2002). At the time Russo was one of only six female CEOs running Fortune 500 companies. And, just like Carly Fiorina of Hewlett-Packard and Anne Mulcahy of Xerox, Russo was put in charge of a company in crisis.
The company had spun off its Agere Systems Unit, which produced integrated circuits and optical-electronics systems, and Avaya (formerly Business Communications, which she had run), supplier of office-telephone and voice-messaging systems. In 2002 capital spending by phone companies in the United States fell 38 percent. As a result Lucent was struggling in a sea of debt. Thus, being named Lucent CEO "wasn't like inheriting a world championship team," Steve Kamman, an executive director at CIBC World Markets, told BusinessWeek (May 29, 2003).
The response to Russo's return was mixed. Some industry insiders predicted that she would boost sagging company morale. Company leaders felt that her insider status and familiarity with Lucent's products would facilitate her helping the company return to profitability. In a statement in Network World , Schacht said, "Pat brings deep knowledge of our industry and our customers, coupled with the ability to lead a large organization through change. She understands and embraces our strategic and restructuring plans, and she can step in as CEO without missing a beat" (January 7, 2002).
But some analysts were concerned that her return simply signaled a reemergence of Lucent's old bureaucratic ways, an unfavorable reminder of the AT&T days. "I'm concerned that the management team at Lucent is heavily concentrated with people who have been there for 10 to 15 years," the Lehman Brothers analyst Steve Levy told Telephony (January 14, 2002).
Even as pressure mounted, Russo maintained her composure. Stephanie Mehta of Fortune commented on her "flawless posture and the way she chooses her words. She comes across as well prepared and in command" (April 15, 2002). Although she was known and respected for her firm leadership, she also had a softer side that she was quick to exhibit in the company of friends and employees. She reportedly carried chocolate, a favorite food, wherever she went in order to prove that she was a real person.
Russo was determined to turn Lucent around and show a profit by September 2003 (she later had to revise her estimate to 2004). Her first order of business was to execute the turnaround plan that Schacht had drafted, which focused on the sales of Lucent products to wireless-telecommunication companies (such as AT&T and Verizon Wireless) and Internet service providers. Lucent faced a lot of competition in that arena, however, from companies such as Cisco Systems and Ciena Corporation.
Russo set to work reducing operating expenses, vendor-financing commitments, and working capital. The reduction of expenses necessitated spinning or selling off businesses that no longer fit within the company's sharpened focus. Another more difficult part of reducing expenses was the cutting of staff. By the time Russo took charge, the company had already trimmed the number of employees by nearly half (removing about 44,000 jobs). Russo would oversee thousands more layoffs.
In an effort to return to profitability, Lucent began to reshift its focus from simply providing equipment to the telecommunications industry to providing customer-centric services. Rather than just promote the company's existing products, Lucent asked customers what they wanted and designed offerings accordingly. The new Lucent offered a wide range of services, from installation to network optimization and outsourcing. The company began looking at establishing new partnerships—some even with rivals. In May 2003 Lucent signed a deal to resell products produced by its competitor Juniper Networks.
Russo also focused on the company's strongest moneymaking potential: its sales force. "In many ways I am Lucent's chief salesperson. Now more than ever, an experienced, creative, and committed sales team is absolutely critical to our turnaround and success going forward," she told Sales and Marketing Management (November 1, 2002).
It was not surprising that Russo so aggressively pursued sales, as she was well known for her competitiveness. Colleagues had reportedly asked her not to participate in golf and tennis matches on corporate retreats because she tended to win every game. In 2002 Golf Digest ranked her among the top 100 CEO golfers in the country.
Despite Russo's efforts, in October 2002 Lucent's market position had not improved. The company posted its 10th straight quarterly loss, to the tune of $2.88 billion. Its stock, which had soared to more than $80 a share in 1999, had subsequently plunged more than 90 percent to less than a dollar. Standard & Poor's dropped Lucent's credit rating, which was already considered junk. Some investors talked about the possibility of bankruptcy, a suggestion Russo and other company executives quickly dismissed. She told the Boston Globe , "When this storm is over, we expect to be a leader" (October 12, 2002).
In February 2003 Russo was named chairwoman of Lucent; after a tough couple of years, things were starting to look up for the beleaguered company. Eight months later in October Lucent reported a profit for the first time in three years. Although she admitted the company would probably still have its financial ups and downs, Russo announced that Lucent was finished downsizing (having reduced the number of employees from the 150,000 of three years before to about 35,000) and would not lay off any additional staff. "We have weathered the storm," she told the Associated Press (October 22, 2003).
Russo sat on the boards of Schering-Plough Corporation, Xerox Corporation, New Jersey Manufacturers Insurance Company, and her alma mater, Georgetown University. In addition to her degrees from Georgetown and Harvard, Russo received an honorary doctorate in entrepreneurial studies from Columbia College in South Carolina.
See also entry on Lucent Technologies Inc. in International Directory of Company Histories .
Duffy, Jim, "Lucent Taps Russo as CEO," Network World , January 7, 2002.
Gilbert, Jennifer, "Tough Sell," Sales and Marketing Management , November 1, 2002, p. 30.
Howe, Peter J., "Lucent Plans to Chop Another 10,000 Jobs," Boston Globe , October 12, 2002.
Johnson, Linda A., "Patricia Russo Returning to Lucent as Chief Executive," Allentown Morning Call , January 8, 2002.
Kharif, Olga, "Patricia Russo: Lucent's Best Hope?" BusinessWeek Online , May 29, 2003, http://www.businessweek.com/technology/content/may2003/tc20030529_9745_tc111.htm .
"Lucent Attempts a Russo Resuscitation," Telephony , January 14, 2002, p. 8.
McKay, Martha, "Why Patricia Russo is Lucent's Guiding Light," Calgary Herald , June 16, 2003.
Mehta, Stephanie N., "Pat Russo's Lucent Vision" Fortune , April 15, 2002, p. 126.
Mulvihill, Geoff, "Lucent Posts First Profit Since 2000," Associated Press, October 22, 2003.
Smith, Geoffrey, "Will She Click at Kodak?" BusinessWeek , April 23, 2001, p. 50.