The layoffs are just the latest sign of financial woes at Lucent. The company, which said it would discontinue paying its dividend--usually a sign of financial distress--issued a whopping 4,970-word press release detailing its finances.
The embattled telecommunications-equipment company Tuesday posted a net loss of $3.25 billion, or 95 cents per share, for the third fiscal quarter, including discontinued operations, a $684 million restructuring charge and other accounting charges.
Excluding discontinued operations and one-time charges, the company recorded revenue of $5.82 billion, down from $5.91 billion in the second fiscal quarter. It posted a loss on that basis of 35 cents per share. The revenue figure is in line with analysts' expectations, but, according to First Call, the average loss predicted by Wall Street was 21 cents per share, with a range of 9 cents to 27 cents.
Shares were off 12 percent, or 99 cents, to $6.91, in early trading.
The new layoffs--and resulting fourth-quarter charge--are part of a continuing effort by Lucent to shore up results and boost its cash in the midst of a dramatic slowdown in spending in the telecom sector.
In a related move, the company announced it would cease issuing a dividend, and would instead reinvest those funds "into its new go-to-market business model." It speculated that this move would save $68 million each quarter.
Since January, Lucent has reduced its work force by 19,000 and eliminated 5,500 contract positions. The company said Tuesday that around 8,500 of those workers left through a voluntary retirement program. Including the voluntary retirement figures, Lucent had roughly 86,500 employees at the end of the quarter.
The company will take a $1.2 billion charge in the fourth quarter related to the headcount reductions. Lucent also took a 13-cent-per-share charge related to increased financing for two companies, including Australia's One.Tel, a failed telecommunications company that Lucent has a legal claim against.
Fiber unit, manufacturing ops sold
In another step that should boost cash levels, Lucent said Tuesday that it was selling its Optical Fiber Solutions business to Furukawa Electric and Corning for $2.75 billion.
Stock price from July 2000 to present.
Source: Prophet Finance
The sale clears the way for Lucent to spin off the remainder of Agere Systems.
Furukawa and CommScope have also agreed to enter into one or more joint ventures that will operate the optical business. The deals are expected to close at the end of the third calendar quarter.
Lucent is also selling its Oklahoma City and Columbus, Ohio, manufacturing operations to electronics-manufacturing services company Celestica in a deal worth between $550 million and $650 million. As part of the agreement, Lucent has entered a five-year, $10 billion deal that will make Celestica the primary manufacturer for Lucent's switching, access and wireless businesses. The sale is expected to close by the end of the current quarter.
New strategy, spin-off delayed
"Our intent is to be a company with a sharper focus, less overhead and less complexity," CEO Henry Schacht said in a release. Lucent's plan, which it made public earlier this month, is to specialize in two business segments: mobile technology and integrated network solutions.
"We are focusing on the largest service providers in the world, providing them with next-generation mobile and fixed networks," Schacht said.
The company hopes to eliminate an additional $2 billion in annual expenses and reduce its capital spending rate by an additional $750 million.
If all goes as Lucent plans, the company will record a positive cash flow by fiscal 2002. But it cautioned that "due to market uncertainties," it will no longer provide guidance for revenue.
That didn't sit well with some analysts. At least one complained that he didn't see "how there can be any credibility in that profitability target," without an accompanying revenue target.
While Chief Financial Officer Frank D'Amelio declined to be specific about future sales figures, he did elaborate, saying, "The statement of positive cash flow and profitability in 2002 is not dependent on significant cash growth."
Lucent has struggled mightily over the past year or so, missing its numbers, ditching its CEO, laying off thousands of workers and scrambling for credit to cover its business operations.
The new restructuring plan will require some modifications of those credit agreements, the company said today, although Schacht noted that it would not require an increase in its credit.
That renegotiation could push back the proposed spinoff of Lucent's Agere unit, which makes optical components, by at least six months, executives said on a conference call. Lucent said it would consider an alternative path, such as a secondary public offering, to achieve full independence for Agere. The spinoff of the unit began in March.
Product sales were $4.61 billion, down 2 percent from the second quarter and 24 percent from a year ago. U.S. sales, which account for 61 percent of total sales, fell 38 percent from the year-ago quarter and 14 percent from the second quarter.
Revenue from Lucent's services business inched up 3 percent from the second quarter to $1.14 billion, but that was still 12 percent off from the year-ago period. U.S. service revenue, which accounts for 75 percent of that division's sales, was up 17 percent sequentially and down 4 percent from the year-ago quarter.