Lucent Technologies on Tuesday posted a stunning loss in the fourth quarter, including an $8 billion restructuring charge.
The telecommunications-equipment maker posted a net loss of $7.3 billion, or $2.16 per share, including the charge. Revenue for the quarter was $5.2 billion, compared with $5.9 billion in the third quarter, and off 28 percent from a year ago. That excludes the results from discontinued operations and an extraordinary gain from the sale of its power-systems business.
The $8 billion one-time charge included $4.6 billion to write off assets, $2.3 billion related to layoffs, $282 million for a pension-curtailment charge and $850 million in other charges.
Excluding the charges, the company recorded a loss of $909 million, or 27 cents per share. Analysts were expecting the company to lose 23 cents per share on that basis, according to First Call.
Despite the losses, the company reiterated plans to return to profitability in 2002, but acknowledged that the telecommunications market is facing tough times.
The company now sees the overall market declining 15 percent to 20 percent in 2002, with Lucent's targeted market falling off 10 percent or more. That's off its earlier prediction of a 5 percent to 10 percent drop in the telecommunications-equipment market and flat growth in its own targeted market.
"We think industry spending in our first fiscal quarter of 2002 will be even lower than these levels due to the uncertainty after Sept. 11 and the spending patterns of our large North American customers," Chief Executive Henry Schacht said.
But he did note that the company is seeing "early signs of increased customer spending" in some segments for the second quarter of 2002.
While revenue is expected to decline in the first quarter, earnings-per-share figures should get better, Schacht said, because of improvements in expense management and continuing restructuring moves.
Margins are also expected to improve. Lucent recorded profit margins from continuing operations of 12.5 percent, off from 16.5 percent in the previous quarter. But the company said the decline was because of inventory-related charges, which pulled the figure down from 21 percent.
Chief Financial Officer Frank D'Amelio said the company is on track to boost margins to 35 percent in fiscal 2003, but it needs to put in place more cost-saving programs and work on its product mix.
For the year, Lucent lost $14.2 billion, or $4.18 per share, including a total of $11.4 billion in restructuring charges.
The company has been trying to trim expenses and get its cash flow under control. Lucent reduced its work force by 29,000 workers, as part of its goal to cut employee levels in half, down to between 57,000 and 62,000, by the end of the second fiscal quarter of 2002. And its expense run rate, or annual rate of expenses, has dropped by $2.4 billion.
Despite fiscal improvements, Lucent is still reporting a negative $280 million in cash flow, meaning the company has spent more cash than it took in during the quarter.
Lucent said it thinks it has enough funding to complete its restructuring plan; it brought in $1.9 billion from a stock offering and $330 million from a real estate deal during the quarter, as well as $575 million from the sale of some manufacturing operations. As of Sept. 30, it had a cash balance of $2.4 billion.
To stay on track, the company said it needs to reduce operating expenses another $2 billion on an annual basis and let go of another 15,000 to 20,000 workers, among other things.
Lucent's products division posted revenue of $4.1 billion, off 12 percent from the third quarter and 27 percent from a year ago. But wireless product sales actually rose 26 percent compared with the third quarter. During the quarter, Lucent signed a five-year deal with Cingular Wireless to supply mobile network equipment and software.
The services division saw sales fall 12 percent from the third quarter to $1 billion.