Lucent announces new focus, restructuring on target

Struggling telecommunications equipment manufacturer Lucent Technologies Inc. is on track to complete the second phase of its restructuring plan and has a new product and organizational strategy to complement that plan, officials from the company said Thursday on a Webcast.

The company sees the telecommunications industry reorganizing around fixed line and wireless service as well as global markets and will restructure the company accordingly, with three tiers of focus, said Bill O’Shea, executive vice-president of corporate strategy and business development. This reorganization will make the company smaller and leaner, he said.

Lucent will focus the majority of its business on its top 30 customers, companies located in 20 countries worldwide, which are responsible for roughly 75 per cent of Lucent’s revenue, O’Shea said. The company will put the bulk of its research and development and sales efforts in this area to better serve its top customers, O’Shea said. While concentrating on these companies and countries, Lucent will also sell to other markets in those countries, he said.

The 20 main countries will be used as hubs, with neighboring countries and markets serving as spokes, O’Shea said. Spoke countries will, however, see less focus, especially in research and development, he said. Lastly, countries and markets not served by either of the first two plans will be covered by agreements with partners and value-added resellers, he said.

In addition to announcing the company’s new organizational structure, O’Shea also discussed a new product strategy. Product strategy details were sparse – more were promised for another press conference to be held in November. O’Shea said Lucent would organize its products into two categories: foundation products and growth products.

Foundation products are the products that Lucent currently sells and are responsible for the bulk of its revenue, he said. They are expected to bring in US$15 billion in revenue in 2002 and account for 40 per cent of the company’s research and development, he said. Growth products will be those that grow Lucent’s business and enable its customers to create new services, he said. These products are expected to net $5 billion in revenue and account for 60 per cent of research and development in 2002.

Some of the company’s forthcoming products include auto-configuring “Service Intelligent networks” and wireless offerings, O’Shea said.

The news was not all good, however. Frank D’Amelio, Lucent’s chief financial officer, said the company expects the overall telecommunications equipment market to decline between five and ten percent in 2002 and that the company will take charges of between $7 billion and $9 billion to complete its Phase 2 restructuring plan.

D’Amelio also touched on the subject of layoffs. While not announcing any new job cuts, he did say that 2,200 employees had been given notice Thursday and that 2,300 had been let go in the last month. One thousand more job cuts are to be expected this quarter, he said, adding that 2,500 cuts will be made outside the United States starting Thursday. All cuts will be done by the first half of fiscal 2002, which ends for the company on March 31, he said. After the cuts, Lucent will be left with between 57,000 and 62,000 employees, down from 123,000 at the end of 2000, he said.

Lucent has been besieged by financial troubles in the last year which have led to missed earnings expectations, the sale of large portions of the company and massive layoffs. In July, the company reported a loss of US$1.89 billion for the third quarter, which coincided with a year-over-year drop in revenue of almost $2 billion. Lucent also ended its stock dividend program at that time. The same day, Lucent said that it would cut between 15,000 and 20,000 jobs, adding to the 19,000 layoffs already instituted this year.

In an effort to resuscitate its finances, Lucent has sold off a number of its subsidiary businesses, including its fiber-optics business, sold to Furukawa Electric Co. Ltd. for $2.75 billion, its stake in two joint ventures in China for $225 million and manufacturing facilities in Oklahoma and Ohio for $650 million.

A week after the layoff and financial announcements, Lucent said it planned to raise $1 billion in a private, preferred stock offering.

Lucent Technologies, based in Murray Hill, N.J., can be reached at