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Lucent appoints new CFO

The telecommunications-equipment giant continues its reshuffling as the struggling company replaced its chief financial officer and combined two product divisions.

Lucent Technologies continued its reshuffling Sunday as the struggling company replaced its chief financial officer and combined two product divisions into one.

The giant telecommunications-equipment maker said Deborah Hopkins has resigned after one year as chief financial officer. She will be replaced by Frank D'Amelio, a 21-year AT&T and Bell Labs veteran whose last position was group president of Lucent's "switching" unit.

To cut costs and build better technology, Lucent said it is merging its switching and data-networking units, both of which make networking equipment that telecommunications service providers use to transport Internet traffic at high speeds. Janet Davidson, the former president of the data networking division, will take over the new combined unit.

After a series of financial gaffes last year, Lucent executives have spent the past seven months performing a massive makeover of a company that was once a darling of Wall Street.

One Wall Street analyst said Lucent's moves Sunday are not good news for the company because it is still in the midst of a reorganization that includes the layoffs of 10,000 employees and the outsourcing of its manufacturing of products to outside companies.

"The wheels started coming off the bus right after she got there, so she can't be blamed for the fundamental issues facing the company," said Lehman Brothers analyst Steven Levy. "The efforts Deb put in place to stabilize the ship, so to speak, just seemed to be taking hold. So it's strange timing. They are at the beginning of their restructuring. And it's a fragile point in their turnaround."

While the company in April reported a second-quarter loss of 37 cents per share, its $5.9 billion in revenue beat some analysts' estimates by about $400 million.

"The last quarter was two steps forward, and this was one step back," Levy said, referring to Hopkins' departure.

Lucent executives, however, said in a statement that Hopkins decided to leave the company to pursue other opportunities now that Lucent's turnaround plan is in place and the company has the financing it needs to pursue that plan. Lucent in February had secured $4.5 billion in loans to fund its business and avoid the potential reduction in its credit rating to junk status.

"Deb was an important member of the senior team at a critical time...She put a strong financial team in place and helped lay the foundation for many of the systems and financial improvements we saw last quarter," interim Chief Executive Henry Schacht said in a statement. "Deb was instrumental in helping to design the turnaround plan and putting the required financing in place to execute that plan."

Levy, however, speculates that Hopkins may have left Lucent because of a disagreement with other senior executives. Hopkins is one of the few--possibly the only--high-ranking senior executives who came from the outside and were not longtime Lucent or AT&T executives, Levy said.

Hopkins and other Lucent executives could not be reached for comment.

Most analysts have said that Lucent needs to use this year as a restructuring year, and they predict that the company won't become profitable until 2002. Like 3Com, Lucent's turnaround efforts are hampered by the U.S. economic slowdown and slower sales of products to service providers.

The past 16 months have been the most brutal for Lucent since it spun off from AT&T in 1996. Its stock has dropped from a 52-week high of $67.19 to $11.15.

After beating analysts' earnings estimates for 15 straight quarters, Lucent has been on a downward spiral since January 2000 when the company missed earnings by 18 cents per share and reported a $1 billion drop in sales.

The company in July 2000 reported better-than-expected third-quarter earnings, but warned of slower revenue growth for the rest of the fiscal year because of declining sales of its traditional voice products.

The Lucent board of directors ousted Chief Executive Rich McGinn in October after the company missed its fourth-quarter earnings and cut its fiscal first-quarter outlook. Schacht, the acting chief executive, then announced plans to integrate the company's sales and professional-services organizations as part of a reorganization.

Lucent in December cut earnings expectations again for the first quarter and restated fourth-quarter earnings, reducing revenue by $700 million after executives discovered an accounting error.

Lucent executives blamed the company's original woes on being too slow to respond to the need for higher-speed optical equipment, allowing Nortel Networks to take an early lead in the exploding market. Optical equipment allows service providers to send larger amounts of Net traffic across their networks at faster speeds. The company said it corrected the problem by late 2000 by increasing manufacturing of optical equipment.

But later in the year, Lucent executives blamed its earnings warnings partially on bad loans to emerging telecommunications carriers that couldn't pay their bills.

In its reorganizations the past year, Lucent has also made itself smaller, spinning off Avaya, its slow-growing corporate networking business, and Agere Systems, its lucrative chipmaking and fiber-optic component business.

Lucent representatives on Sunday said the company is now made of four main divisions: optical networking equipment, wireless equipment, professional services, and the new combined switching and data unit.

In another move to streamline operations, the company on Sunday consolidated its chief information officer group and its business-services group under executive vice president Bob Holder, who oversees the company's product units, manufacturing and internal operations.