NEWSMAKER-Russo out at Alcatel-Lucent, a French-US disconnect

By Sinead Carew

NEW YORK, July 29 (Reuters) - Alcatel-Lucent (ALUA.PA) CEO Patricia Russo was ousted on Tuesday after failing to live up to hopes that she could breach cultural divides at the French-American telecom equipment company.

Russo was always going to be an anomaly among France's business elite, becoming the only American and the only woman to head a company in the country's CAC-40 index of blue chips when she took the job in December 2006.

But even her most loyal supporters now have to concede that the merger was a disaster under her reign. The company lost more than half its market value, beset with tough new competition and consolidation among its clients.

Alcatel-Lucent said on Tuesday that Russo will step down by year-end, along with Chairman Serge Tchuruk, who leaves Oct. 1.

"We would suspect that the new CEO is likely to be French," said Nomura analyst Richard Windsor. "We hope that a new CEO will be able to bridge the cultural divide between the Americans and the French and get all sides pulling together."

Analysts applauded the ouster of Russo, 56, who came with a reputation for cost cutting and tough negotiating. The U.S. shares of Alcatel-Lucent (ALU.N) rose 6 percent to $6.10, while the Paris shares rose 2 percent to 3.91 euros.

Despite the hype and optimism around the cross-Atlantic merger, which promised massive savings in a difficult market, in reality the ink was not even dry in late 2006 when Russo started to come under pressure.

She caused a stir in some circles by revealing that she would not take lessons to brush up on her high-school French because the French-American company's official language was English.