Lucent's cure may include big layoffs

As the ailing telecommunications equipment maker announces its first-quarter financial results Wednesday, Lucent Chief Executive Henry Schacht and Chief Financial Officer Deborah Hopkins will explain in greater detail its reorganization plans, a company representative said.

It's unclear whether Lucent executives plan to discuss layoffs Wednesday, but analysts believe Lucent will eventually cut about 10,000 jobs, or 10 percent of its work force, as part of a restructuring. Analysts also expect Lucent to announce a large one-time charge because of the restructuring.

Lucent executives in December said they plan to save $1 billion in a reorganization that includes layoffs as it consolidates corporate and marketing functions, streamlines its sales organizations, and cuts its product focus.

Lucent previously warned it will post a first-quarter loss of between 25 cents and 30 cents as sales for the quarter fall to about $6.2 billion, or about 20 percent lower than the first quarter last year. Wall Street analysts are predicting a loss of 27 cents a share, according to a poll of analysts taken by First Call.

"Up until now, they've been talking about restructuring without giving too many details," said SG Cowen analyst Michael Jung. "They've had a fair amount of time to look where they want to cut back."

To help cut costs, Lucent last week announced it will sell off two of its four manufacturing plants, which includes about 8,400 employees. Lucent representatives said the sales will be completed within the next six months, but wouldn't predict how many positions would be cut.

It will take Lucent at least two or three quarters of restructuring before It's known whether the company's changes will help turn the company around, said another analyst, who declined to be identified.

"This is their chance to detail a plan of attack," the analyst said. "Just providing clearer details and additional guidance (for future quarters) will be helpful."

Lucent, which has struggled within the past year, is in the midst of a major restructuring as it tries to focus on the more lucrative service provider market. It has already spun off Avaya, which sells networking products to companies, and it plans to spin off Agere Systems, its chipmaking and optical component business.

Over the past year, Lucent has been hit hard by a faster-than-expected decline in the sale of its traditional voice equipment and slow sales of its newer Internet-based products, such as optical networking equipment. It also made a series of strategic missteps.

Jung rates Lucent stock a "buy," with a 52-week price target of $19. Of the $19, Jung said Agere is worth $12 to $14, making the rest of Lucent worth $5 to $7.

Lucent's shares closed at $18.81 Tuesday.