Has Alcatel Finally Found Mr. Right?

Mike Quigley may not speak French, but he knows the company inside out

EUROPEAN BUSINESS

BusinessWeek
JULY 25, 2005

By Andy Reinhardt in Paris

Will the third time be the charm for Mike Quigley? In April the
52-year-old Anglo-Australian was named president and chief operating
officer of Paris telecom equipment giant Alcatel (ALA ). That puts him
first in line to succeed Serge Tchuruk as chief executive next May,
when he is supposed to step down at age 68. But Quigley is Alcatel’s
third heir apparent in four years. The others resigned for personal
or undisclosed reasons.

Quigley is more likely to stick around. While his two predecessors
came from outside the company, Quigley is a 34-year Alcatel veteran
who until recently headed the company’s North American unit and
its global fixed-line business. He also gets credit for scoring the
biggest sale in Alcatel’s history — a $1.7 billion deal last year
to supply equipment and services to SBC Communications Inc. (SBC )
for its “Project Lightspeed” broadband upgrade.

LANGUAGE BARRIER?

That’s not to say Quigley faces a cakewalk to the top. After steering
Alcatel through the telecom meltdown, Tchuruk apparently wants to enjoy
the rebound. He’s expected to ask the board to let him remain chairman
for two years after stepping down as CEO. The prospect of power-sharing
may have sparked the resignation of Quigley’s predecessor, Philippe
Germond, who couldn’t be reached for comment. But as an Alcatel lifer,
Quigley might be more patient. A potentially bigger stumbling block,
insiders say, is whether the board and employees are ready for a CEO
who doesn’t speak français. Quigley’s reply: His elevation to the
No. 2 spot “sends a strong signal that you don’t have to be French
to lead Alcatel.”

Not French, perhaps, but Tchuruk’s successor will have to be
plenty bold. Alcatel has overtaken Lucent Technologies Inc. (LU )
and Nortel Networks Corp. (NT ) in the past three years, thanks to
its broader product line. Dominance of broadband DSL gear helps,
but Alcatel also sells optical systems, low-cost mobile networks,
and satellites. Profits hit $338 million last year on revenues of
$15.2 billion. Still, Alcatel’s revenues and prices are under fierce
pressure, thanks in part to the emergence of Chinese rivals such
as Huawei Technologies Co. and ZTE Corp. Net margins, at 6.2%, are
the best since 1998, but nothing compared with Cisco Systems Inc.’s
(CSCO ) 23%. Quigley will have to wring out more profits and decide
whether to keep Alcatel so diversified.

Some argue that an Anglo-Saxon CEO could boost Alcatel’s global
standing. The company gets 58% of revenues from outside Western Europe,
and a third of its employees are in Asia or North America. Yet its
stock trades at a discount to its chief rivals, in part because
of Alcatel’s past as a state company and its continued role as an
instrument of French policy. Says Nomura Securities’ (NMR ) Richard
Windsor: “Some investors perceive it as being a bit opaque.”

The son of an Irish carpenter, Quigley was born in England but moved
with the family to Australia when he was 12. Summer jobs hanging
skins in a tannery and screwing tops onto bottles convinced him of
the value of education, Quigley says. He holds degrees in physics,
math, and electrical engineering.

After college, Quigley went to work for ITT Australia as a design
engineer. His group was eventually sold to Compagnie Générale
d’Electricité, which later morphed into Alcatel. At 38, the father
of three girls was diagnosed with life-threatening leukemia. After
reading up on immunology, Quigley decided to undergo a risky bone
marrow transplant, using cells supplied by his brother. He says the
disease changed him forever: “Once you’ve stared death in the face,
every day is a good day.” Life for Quigley could get even better if
he manages to break the succession curse at Alcatel.

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