Just hours after the company’s board fired its top officer last month, Lucent Technologies Inc. released its fourth quarter earnings results and said it was disappointed with them. The telecommunications equipment maker said that pro forma revenue from continuing operations increased 14.6 per cent to US$9.4 billion for the fourth quarter ending Sept. 30. This compares to US$8.2 billion for the same quarter last year.
Pro forma earnings for the quarter were 18 cents a share or US$600 million, down from 24 cents a share or US$768 million a year ago.
The results are in line with a revised financial forecast issued by Lucent on Oct. 10, and exceed by one penny the earnings estimates of financial analysts polled by First Call/Thomson financial. Those analysts had restated their earnings prediction from 24 cents after Lucent issued its warning.
Including one-time charges and other items, Lucent reported a net loss for the quarter of US$225 million or 7 cents a share compared to net income of US$947 million or 29 cents per share for the same time last year, Lucent said.
Lucent’s performance in the quarter was hurt by three factors, Deborah Hopkins, Lucent’s chief financial officer, said in a statement.
Revenue and gross margins in its optical equipment business were lower-than-expected, primarily because Lucent was late to market with its high-performance OC-192 networking product. Lucent also experienced lower-than-expected revenue and margins from switching products. The company was also forced to increase its reserve to cover potential bad debts from some of its customers, she said.
In a conference call with press and analysts, Henry Schacht, Lucent’s newly-installed interim chairman and CEO, expressed disappointment at the company’s performance, but said the problems at Lucent can be rectified with a restructuring program that will begin immediately and unfold during the course of fiscal 2001.
“The company’s issues are ones of execution and focus, and they are fixable,” said Schacht.
The first step to fixing Lucent, apparently, was to eject its chairman and chief executive officer of five years, Rich McGinn. McGinn’s departure was announced earlier Monday, prompting Lucent to announce its financial results a day before they had been due.
Among the other changes to be made, Lucent will consolidate its corporate infrastructure to improve efficiencies and reduce costs, and re-deploy its marketing and sales teams to align them with the high-growth areas like optical networking, wireless and Internet infrastructure, Hopkins said in the conference call. The company will also attempt to improve its supply chain management, and implement a new ordering system for customers that is more responsive and efficient, she said.
“2001 will be a rebuilding year,” Hopkins said. “We’re essentially taking the company apart to build it back up.”
Lucent expects to take a restructuring charge in the first quarter of 2001, which ends Dec. 31, to cover these activities. Also in the first quarter, the company’s revenue flow is likely to be disrupted while Lucent redeploys some of its sales and marketing staff, she said. Because of these and other factors, Lucent has revised its first-quarter earnings forecast and now expects pro forma earnings to break even with a year ago, Hopkins said.
The company has also lowered its expectations for fiscal 2001. The revised expectations are related to deployment of the OC-192 optical system, the continuing decline in switching hardware and software sales, anticipated revenue impact of realigning sales resources and investing in the next generation of wireless, optical and data products.
Earlier in the day, Lucent said it had ousted McGinn because it needed to change its leadership after five quarters of not meeting its earnings forecasts. Schacht, who was the top executive at Avaya Inc., Lucent’s networking spin-off, will assist in the search for a new chief executive for Lucent, which is based in Murray Hill, N.J.
“We’re going to start a search to look for a successor CEO, but in the meantime we’re going to run this company the way it needs to be run, make the decisions that need to be made, and put this company back on the track it was on,” Schacht said on the conference call.
For the full 2000 fiscal year, Lucent’s revenue rose 12.7 per cent to US$34.5 billion, compared to US$30.6 billion a year ago. Including certain one-time items and amortization of goodwill and acquired technology, Lucent reported net income of US$1.5 billion or 44 cents per share compared with net income of US$4.8 billion or US$1.49 a share for the fiscal year ending Sept. 30, 1999.
Lucent’s shares ended the regular trading session Monday at US$22.06, down 2.49 per cent from Friday’s close and far off its 52-week high of US$84.19, which was achieved last December.