Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser

Posted on: Thursday, December 13, 2001

Telecom slump hurting Lucent, Ciena revenues

Advertiser News Services

Declining demand for telecommunications equipment amid a global economic slowdown has led to mounting losses at two major companies. Lucent Technologies, the world's largest telecommunications equipment maker, and Ciena Corp., the No. 2 U.S. maker of gear used in optical networks, forecast bigger than expected losses for the first quarter of next year in separate announcements today.

Murray Hill, N.J.-based Lucent said revenues will be barely half what they were a year ago because of a continuing industrywide downturn.

Linthicum, Md.-based Ciena forecast an unexpected fiscal first-quarter loss after posting a $1.8 billion loss in the fourth quarter.

Lucent's shares were down 11.9 percent, or 92 cents a share, to $6.81 in midday trading on the New York Stock Exchange.

Shares of Ciena fell $2.68 to $15.29 in late morning trading. They had dropped 85 percent in the past year.

The Standard & Poor's Supercomposite Communications Equipment Index, which includes Ciena and Lucent, fell 7.01, or 6.3 percent, to 104.72.

Ciena, which trails Lucent Technologies Inc. in making gear to send Internet information and phone calls, is one of the last suppliers to say it was being hurt by cuts in spending by customers such as Qwest Communications International Inc.

"We believe we are finally feeling the effects of a significant slowdown in purchasing," Ciena Chief Executive Officer Gary Smith said on a conference call. "This means that we will incur operating losses."

Sales will fall 30 percent to 40 percent from the previous quarter, and 2002 revenue also will decline, said Chief Financial Officer Joseph Chinnici.

Lucent said it expects to lose 23 cents to 26 cents per share — or $780 million to $885 million — from continuing operations in the three months ending Dec. 31. Analysts surveyed by Thomson Financial/First Call had predicted a loss of 17 cents per share.

"Despite the fact that (current) sales are much lower than we hoped and other people expected, we will still lose less this quarter than in the last quarter," Lucent chief executive Henry Schacht said.

Since last December, Lucent has cut its work force from 123,000 to 77,000, as well as cutting costs for everything from employee benefits and travel to utilities and real estate, Schacht said. It also has sold some of its smaller businesses and narrowed its focus to a couple of dozen key customers — the world's largest telephone and Internet service providers.

Under the second phase of its wide-ranging restructuring program, Lucent plans to cut an additional 15,000 to 20,000 jobs.

In making the latest financial projections, Lucent cited an industrywide reduction in spending on network infrastructure and related services. But the telecommunications giant also said it expects first-quarter revenues will represent the low point for Lucent sales in the market downturn.

"We see a significant increase in the number of orders that are being discussed and the number of orders that are being placed," Schacht said. "(Those) early signs suggest ... we'll have increased sales in the first calendar quarter" of 2002 compared with the current quarter.

The company expects to return to profitability sometime during its 2002 fiscal year and to increase its gross profit margin from 12.5 percent in the just-ended quarter to 35 percent during its 2003 fiscal year.

Schacht said Lucent will reach that goal through a combination of ongoing cost reductions through increased productivity and consolidations; the end of a series of huge one-time charges for severance pay, other costs related to layoffs and writedowns of uncollectible loans to customers; increased volume efficiencies and a shift to more higher-margin products than it had been selling; and revenues from new products.

"There are 40-some new product introductions over the next 18 months," including wireless, optical, switching, data and software products, Schacht said.