Lucent CFO Resigns After 1 Year on Job
In another sign of turmoil at the struggling telecommunications-equipment firm, Lucent Technologies Inc. said Sunday that its high-profile chief financial officer resigned after just one year on the job.
Lucent replaced Chief Financial Officer Deborah Hopkins with Frank D’Amelio, president of Lucent’s switching solutions business.
Hopkins’ departure may raise additional questions about Lucent, which is cutting 16,000 jobs, canceling product lines and shedding businesses in a bid to return to profitability.
Shares of the No. 1 U.S. maker of phone equipment have plunged 81% since Hopkins was named CFO on April 24, 2000. Lucent has been looking for a new chief executive since October.
“This is the last rat leaving a sinking ship,” said Uri Landesman, chief investment officer of AFA Management Partners, which has sold its Lucent shares. “If [Lucent] were on the uptick, she wouldn’t have left.”
Hopkins, 46, and D’Amelio, 43, weren’t available to comment.
The company has posted losses in four straight quarters. It had a $3.69-billion loss in the period that ended in March because of larger-than-expected charges for eliminating product lines and jobs. Sales fell 17% to $5.92 billion from a year earlier.
Some Lucent investors have said they bought shares in part because Hopkins was hired. She came to the Murray Hill, N.J.-based company after 16 months as CFO at Boeing Co., and was ranked as the second-most powerful woman in business in a poll taken last year by Fortune magazine.
Although Hopkins helped Lucent negotiate $6.5 billion in new financing, investor concerns lingered and forced the company in early April to deny rumors it would file for bankruptcy protection. Credit rating agencies have indicated they may cut Lucent’s rating to junk status if things don’t improve.
Sources told Reuters that Lucent’s new chairman, Henry Schacht, had a markedly different management style, strategy and priorities than former Chairman Rich McGinn, who hired Hopkins. McGinn was fired in October after a series of profit shortfalls, and product development missteps.
Lucent said D’Amelio has both the financial and operational expertise the company needs during the next phase of its restructuring. Hopkins had strong financial skills, but she lacked the necessary product knowledge and industry contacts, sources told Reuters.
Hopkins had joined Lucent just a few months after its financial woes surfaced. Since then, the problems worsened, competition intensified, and telecommunications carriers began cutting their equipment purchases in the slowing economy.
Hopkins had been a key architect of Boeing’s financial turnaround, but failed to meet some of Schacht’s expectations, sources said.
Hopkins had been widely credited with helping Boeing rebound from a 1997 loss--its first in 50 years--helped refocus the aerospace giant on the bottom line, and oversaw sequential profits in 1998 and 1999.
The details of Hopkins separation package have not been completed, but the discussions have been amicable, sources said.
With D’Amelio, Lucent has a CFO “who understands everything from our finances to our photons. He has the balance sheet view and the broadband view,” said Lucent spokesman Bill Price.
“Henry [Schacht] has shown himself willing and able to take the tough medicine that needs to be taken,” said Carly Fiorina, who left Lucent in 1999 to become CEO of computer-maker Hewlett-Packard Co. “Henry and Frank are what Lucent needs.”
The Hopkins departure is just the latest news to roil Lucent. On Thursday, two Lucent scientists and a third Chinese man working in the United States were accused in federal court of stealing software and selling a copy of a Lucent product in China.
Lucent also faces class-action lawsuits by shareholders who claim they lost money last year because of company wrongdoing.
Lucent shares rose 45 cents Friday to $11.15. They may fall today because of Hopkins’s departure, Landesman said.
“It doesn’t seem like they’re making too much progress on the CEO search,” he said.
The company fired McGinn two weeks after he said he had no plans to leave. Lucent named Schacht, who’d run the company before McGinn’s promotion to CEO, to replace him until a successor is found.
In a January interview, Schacht bristled at the suggestion that Hopkins was responsible for Lucent’s problems.
“Deb’s been the person who’s been leading the effort to get us back on track,” Schacht said.
Hopkins said she plans to spend time with her children before deciding what to do next.
“Now that Lucent’s restructuring program and the required financing are in place, it’s the natural time for me to leave and pursue other opportunities,” she said in a statement.
D’Amelio began his career in 1979 at Bell Laboratories before joining AT&T; Corp., the biggest U.S. long-distance phone company, in 1988. He was appointed controller of AT&T;’s Network Systems division before becoming its CFO in 1996, the year Lucent was spun off from AT&T.;
At switching solutions, D’Amelio oversaw the development and manufacturing of Lucent’s software that runs telephone networks.
“In rebuilding the company, we need someone who understands both broadband and the balance sheet,” Lucent spokeswoman Michelle Davidson said.
Hopkins hadn’t said publicly she planned to leave Lucent. She had expressed frustration at the company’s struggles.
“I was handed a set of cards, and I’m making the most of the cards I’ve got,” she said in an interview published in September. “This is not the order I would have put them in.”
Lucent paid Hopkins a $4-million cash bonus to join the phone-equipment maker. It also agreed to help Hopkins secure a mortgage for a new house in New Jersey and cover any losses when she sold property in Washington state.
Hopkins was offered a base salary of $650,000 and a performance-based bonus that could double her annual wages, according to a 2000 filing at the Securities and Exchange Commission.
She also received 120,000 Lucent shares and options to buy an additional 650,000.
As part of its management changes, Lucent also said it combined its software switching and data networking units and named Janet Davidson, formerly Lucent’s group president of InterNetworking Systems, to lead the new unit.
“The time is right, for Lucent and for the technology, to combine our switching and data networking businesses in a way that best meets the needs of large service providers,” Schacht said.
By combining these two business groups, Lucent said it is putting together all the elements and skills required to build next-generation communications networks. The new unit, which has yet to be named, will have about 15,000 employees.
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Bloomberg News, Reuters and Associated Press were used in compiling this report.
