Lucent warns of losses and restructuring

Lucent Technologies Inc. dumped more bad news on its users Thursday morning, warning that it expects to report a “significant” loss for the current quarter and disclosing that its revenue total for the previous three-month period is being reduced by US$679 million.

The beleaguered Murray Hill N.J.-based vendor of networking and telecommunications equipment also said it’s in the process of finalizing a restructuring plan aimed at reducing its costs by more than $1 billion. The corporate makeover is due to include workforce reductions, a rationalization of various product lines, administrative and marketing consolidations and a streamlining of sales support functions.

The cost-cutting actions will be detailed when Lucent announces the final results for its fiscal first quarter late next month. The company said a review of its internal business processes will continue throughout next year and may result in additional cutbacks aimed at lowering expenses.

The current fiscal year “will be a rebuilding year . . . for Lucent,” said Henry Schacht, the company’s interim chairman and CEO. “We have identified the issues we must tackle, and we are undertaking a major retooling of the business. We are looking for a fresh start in the new year as we implement our restructuring and get our company back on track.”

For the quarter ending this month, Lucent said it anticipates reporting a loss of 25 to 30 cents per share, with revenue from continuing operations declining about 20 percent from the same period last year. Schacht said the pessimistic outlook “reflect(s) a significant sales decline in North America” due to a softening in purchases by telecommunications carriers and other factors.

Lucent, which turned to onetime CEO Schacht after firing top executive Richard McGinn two months ago, also is restating the fiscal fourth-quarter results it reported at the same time. Revenue is now being pegged at $8.7 billion instead of the $9.4 billion that was originally announced by the company.

Lucent last month said it had discovered a $125 million revenue shortfall for the fourth quarter ended Sept. 30. Today, the company detailed another $554 million in revenue reductions, including $452 million worth of products that it’s taking back from distributors and systems integrators after they couldn’t find users for the equipment.

In the case of the $125 million that was previously identified, Lucent said there had been “misleading documentation and incomplete communications” between a sales team and its finance department over credits being offered to a customer in connection with a software purchase. The company added that it’s taking disciplinary action, including the firing of one employee.

Schacht — who was CEO of Lucent from 1995 to 1997 and then continued as its chairman into early 1998 — also has reorganized the company’s senior management team, giving new or expanded duties to four executives.

During a conference call Thursday, Schacht said Lucent is aggressively searching for a new CEO and added that he’s committed to filling that job for as long as necessary. “But I am 66, and please let me know if you know how to fix that,” he joked.

“Lucent right now is its own worst enemy,” said Eric Goodness, an analyst at Gartner Group Inc. in Stamford, Conn. The company should be able to suffer through its ongoing problems without completely collapsing, Goodness said. But, he added, it “really need(s) to find leadership that can stop the hemorrhaging.”

Lucent is being hit on two fronts, according to Goodness: start-up providers of digital subscriber line (DSL) services are having their own financial problems, resulting in reduced sales opportunities for vendors such as Lucent, and the company faces stiff competition from other makers of telecommunications equipment such as Sycamore Networks, Inc. in Chelmsford, Mass., and Juniper Networks Inc. in Sunnyvale, Calif.

The planned cutbacks due to be detailed next month will be in addition to earlier restructuring moves announced by Lucent, including a spin-off of the company’s microelectronics unit into a separate business called Agere Systems and the sale of its power systems group to Bermuda-based Tyco International Ltd.

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