Lucent to cut up to 20,000 jobs
By Rachel Beck
Associated Press
NEW YORK — Lucent Technologies Inc., the AT&T spinoff that once looked so promising, posted a hefty $3.25 billion third-quarter loss yesterday and announced plans to eliminate 15,000 to 20,000 more jobs.
The Murray Hill, N.J.-based company also said it was eliminating its 2 cent quarterly dividend beginning Sept. 1 — a move the company said would free up $68 million per quarter — and unveiled an agreement to sell its fiber-optics operations for $2.75 billion.
When the once high-flying telecommunications network software and services provider is finished slashing jobs and selling off pieces, its work force will be half of what it was in January.
Chairman and chief executive Henry Schacht said that the aggressive cost-cutting efforts would return the company to profitability by next year.
"We have made a lot of progress this quarter and we are well on the way to getting this company back to where it should be," Schacht said in an interview. He noted that Lucent was on track to reduce expenses by $2 billion a year.
But concerns remain over whether such steps will rescue the embattled company, with some analysts questioning if they come too late.
"They have to do what they are doing to get to profitability," said Rashad Barajakly, an analyst at Williams Capital Group in New York. But, he added, "I would have liked to see them a little earlier."
Lucent's shares plunged on the news, dropping $1.47, or nearly 19 percent, to $6.43 in heavy trading yesterday on the New York Stock Exchange. Its stock has plummeted more than 50 percent since the start of the year and is off more than 85 percent from its 52-week high of $49.04.
Lucent, which was spun off from AT&T in 1996 and is one of the most widely held stocks on Wall Street, was once the darling of the telecommunications industry.
Its business, however began to crumble in late 1999 as it lost sales to competitors that brought faster, new telecommunications gear to market quicker. The national economic slowdown has added to Lucent's problems, as many customers have cut back on spending and others who owe the company for equipment have filed for bankruptcy.
Lucent has responded by implementing a massive restructuring effort.
Lucent has already cut its work force by 19,000 jobs since January, leaving it with about 87,000 employees — and that number doesn't include the more than 15,000 jobs that left the Lucent fold when it spun off semiconductor and optical components division Agere Systems into a separate company earlier this year.
On top of the new round of 15,000 to 20,000 planned cuts, Lucent will trim an additional 6,000 jobs with the sale of its fiber-optics operations and another 4,500 with the sale of manufacturing assets at two plants.
The just-announced job cuts are part of Lucent's "Phase II" restructuring effort. It will take a $7 billion to $9 billion charge in its fiscal fourth quarter to pay for this restructuring, as well as additional asset write-downs as the company streamlines its product offerings.
The new cost-cutting, however, hinges on the company's ability to amend the conditions of certain loan agreements with its banks. Such discussions over its covenants are also expected to delay for up to six months the sale of its remaining stake in Agere.
Lucent said yesterday that it is now exploring a possible secondary public stock offering in order to give Agere complete independence.
Schacht said that the company is confident that the banks will amend the loan provisions.
For the three months ended June 30, Lucent lost 95 cents per share, compared with a net loss of $301 million, or 9 cents share, in the year-ago quarter.
Excluding discontinued operations, Lucent lost $1.89 billion, or 55 cents per share. Excluding other one-time items, including a $684 million restructuring charge, Lucent lost 35 cents per share.
Analysts surveyed by Thomson Financial/First Call were expecting a loss of 21 cents per share.
Revenue from continuing operations declined 21 percent to $5.82 billion compared with $7.41 billion in the year-ago quarter.
Lucent continued to make moves to streamline its operations, announcing two deals yesterday.
Lucent will receive $2.53 billion from Furukawa Electric Co. for the major portion of its Optical Fiber Solutions business, while Corning Inc. will pay $225 million in cash for Lucent's interests in two fiber optic joint ventures in China.
Lucent also said it is selling its manufacturing assets at plants in Oklahoma City and Columbus, Ohio, to Celestica Inc. for up to $650 million and signed a five-year supply agreement under which Celestica will make switching, access and wireless networking systems products for Lucent.
