Advertisment

Lucent posts Q1 loss, to cut 7000 more jobs

author-image
CIOL Bureau
New Update

Ben Klayman

Advertisment

CHICAGO: Telecommunications equipment giant Lucent Technologies Inc. on

Tuesday posted a fiscal first-quarter loss amid a severe telecom spending slump

and said it will cut at least another 7,000 jobs, but added it was past the

bottom with anticipated second-quarter growth.

The Murray Hill, New Jersey-based company reported an operating loss before

an income-tax benefit and other items of $1.28 billion, but it also said the

quarter was the low point for its revenues and demand has stabilized.

"There certainly is no sign of an upturn yet, but everything has been

relatively stable now for the last 90 days," Chairman Henry Schacht told

Reuters in a telephone interview.

Advertisment

Lucent, which has reported net losses totaling $16.2 billion in the last four

quarters, said last month it believed the first quarter would mark the low point

of the market downturn for its revenues.

Lucent said it intends to cut its work force through June by at least another

7,000 jobs, or 11 per cent, to below 55,000 -- 2,000 below the previous lowest

estimate. The cuts would be made through two previously announced divestitures

and outsourcing of some manufacturing operations in Massachusetts.

It employed 62,000 at the end of December and previously said it would cut

its work force to as low as 57,000 by the end of March. When it launched its

restructuring last January, Lucent employed 106,000.

Advertisment

Since last January, when the company launched its restructuring, Lucent's

stock has fallen 50 per cent, but outperformed its peers in the Standard &

Poor's Communications Equipment Index. by about 6 per cent. Lucent said it

expects second-quarter revenues to grow 10 per cent to 15 per cent from the

first quarter, while earnings will improve faster. The guidance means Lucent

would post revenues of between $3.8 billion and $4 billion next quarter.

Analysts were expecting the company to post a second-quarter loss of 17 cents

a share on revenues of $3.42 billion, according to Thomson Financial/First Call.

Advertisment

Waiting in the wings



"We're beginning to see the bottom ... but the fat lady hasn't sung
yet," CIBC World Markets analyst Steve Kamman said. "I think there are

a couple more restructuring items to go. "Given the past four quarters,

we're sort of in a show-me-the-money phase," he added.

Telecom suppliers, including Lucent rival Nortel Networks Corp. and

networking giant Cisco Systems Inc., have been hit hard by the telecom spending

slowdown over the past year. Last week, Nortel reported a steep slide

fourth-quarter sales and said the economic downturn was still weighing on

customers' spending plans.

Lucent, spun off by telephone giant AT&T Corp. in 1996, said on Tuesday

that its break-even point will be cut to $4.25 billion in quarterly revenues

from $4.75 billion by the end of the fiscal year in September. It also repeated

it will hit profitability this fiscal year.

Advertisment

Investors and analysts applauded the company's improved cash flow,

introduction of higher-profit products, and halving of its customer financing

commitments. "The restructuring plan absolutely has traction. They have

their hands around the issues," said David Katz, chief investment officer

of Matrix Asset Advisors, an investment management firm with almost 1.2 million

Lucent shares.

However, several analysts questioned the company's outlook on the conference

call, saying the return to profitability this year could be delayed into fiscal

2003 given market uncertainty.

"The answer is you can't get there from here. It's magic," said an

analyst, who asked not to be identified.

Advertisment

Lucent's first-quarter gross profit margins were 13.7 per cent of revenues,

up 2.2 points from the previous quarter, and they could hit the 20s in the

second quarter. Some analysts were projecting gross margins of about 22 per cent

in the near term, leaving Lucent with a fourth-quarter operating loss.

Must top expectations



"We clearly have to do better than the (analysts') models currently
call for in both gross margins and expense reduction and obviously we think we

can do it," Schacht told Reuters.

Advertisment

The company has a gross-margin target of 35 per cent in fiscal 2003 through a

combination of improved sales and product mix and lower one-time items like

inventory charges. Lucent's first-quarter operating loss, before the income tax

benefit and other items, was $1.28 billion, or a loss of 23 cents a share,

compared with a loss of $2.1 billion, or a loss of 42 cents a share, the

previous year.

After the benefit, its loss was $757 million, compared with a loss of $1.437

billion the previous year. Ongoing revenues fell to $3.47 billion from $3.8

billion in the year-ago quarter, and $4.8 billion in the previous quarter.

Lucent said last month that its first-quarter loss would be larger than Wall

Street expected because of the prolonged spending slowdown. It said its loss

from continuing operations would be between 23 cents and 26 cents a share on

revenues ranging between $3.1 billion and $3.4 billion.

Lucent's net loss for the first quarter was $423 million, or 14 cents a

share, compared with a year-ago net loss of $464 million or 14 cents a share.

The 2001 net loss included a loss from discontinued operations, the effect of

accounting changes and a one-time gain for the sale of a business.

(C) Reuters Limited.

tech-news