CHICAGO – Telecommunications equipment maker Lucent Technologies Inc. on Tuesday posted an $8.8 billion fourth-quarter net loss, mostly due to a massive restructuring charge, amid a bruising industry slowdown.
Lucent, which will have cut its work force nearly in half by next year, has been paying the price for its own missteps in manufacturing and product-development as well as management turnover and intense competition.
It also has been hammered by the industry-wide slowdown that has led to multibillion-dollar losses and charges at rival Nortel Networks Corp. and fiber-optic powerhouse JDS Uniphase Corp. .
Lucent, based in Murray Hill, New Jersey, lost $8.8 billion, or a loss of $2.59 a diluted share, including an $8 billion restructuring charge, a $1.5 billion loss from its former Agere Systems Inc. unit it spun off earlier this year, and a gain from the sale of its power business.
That compared with a net loss of $484 million, or loss of 14 cents a share, in the same period last year. Sales in the quarter fell 28 percent to $5.2 billion from $7.2 billion.
"This to me was a very comforting set of numbers," said Lehman Brothers analyst Steve Levy. "It shows that even in a really negative telecom equipment market they can hold their own."
Levy lauded the company's progress in its restructuring, including staying on track to sell its fiber cable unit to ease liquidity concerns.
A REBUILDING YEAR
Lucent's shares, which have lost more than 90 percent of their value the last two years, were off 27 cents, or 4 percent, at $6.63 in New York Stock Exchange trading.
Since the beginning of the year, the stock has underperformed the Standard & Poor's 500 index by about 40 percent, but outperformed its peers in the S&P Communications Equipment index by about 25 percent.
Lucent Chairman and Chief Executive Henry Schacht said the company expects to return to profits and positive cash flow in fiscal year 2002 despite the current economic weakness.
"All along, we've said fiscal 2001 would be a rebuilding year for Lucent," he said.
Excluding the charge and other one-time items, Lucent lost $909 million, or 27 cents a share, in its fiscal fourth quarter versus a loss of $11 million, or nil a share, a year earlier.
Analysts had expected the company to lose 23 cents, with a range of of 14 cents to 34 cents, according to Thomson Financial/First Call, which tracks such data.
Lucent, which was spun off from telecom and cable giant AT&T Corp. in 1996, had said previously its operating results would improve every quarter this year. It lost $1.2 billion, or 35 cents a share, in the third quarter.
Schacht said the company expects to improve its first-quarter earnings from the fourth quarter, while revenues will decline from the fourth quarter. With early signs of increased customer spending in some businesses, he said revenues should then improve in the second quarter.
Analysts expect Lucent to post a 15 cents a share loss in its fiscal first quarter, according to First Call.
LOWER INDUSTRY SPENDING
Lucent said it expected an overall industry spending to decline 15 percent to 20 percent in 2002, while its targeted larger customers' budgets will shrink 10 percent or more. In late August, the company forecast its larger customers spending would be flat amid an industry decline of 10 percent.
Lucent expects industry spending in its first quarter of 2002 to be even lower than current levels due to the increased uncertainty after the Sept. 11 airplane attacks and the spending patterns of its large North American customers. It plans to halve its spending in fiscal 2002 to $750 million.
The company also said it intends to improve its gross profit margins to 35 percent of revenues in fiscal 2003, compared with a fourth-quarter rate of 12.5 percent. It expects to hit that target through improved sales of higher-profit products, more cost cuts, the elimination of lower-profit products and introduction of new products.
For the fiscal year, Lucent's net loss, including the charge and Agere, totaled $16.2 billion, or a loss of $4.77 a diluted share, compared with a net profit last year of $1.2 billion, or a profit of 37 cents a share. Sales fell 26 percent to $21.3 billion.
As of Sept. 30, Lucent's cash balance was $2.4 billion, and $1 billion was outstanding against the $4 billion in available credit facilities.
Lucent's struggles have been reflected by the industry.
Nortel last week reported shrinking sales and a third-quarter net loss of $3.5 billion, on top of the massive second-quarter loss of $19.4 billion. JDS Uniphase in July posted a $50.6 billion annual loss, probably the largest in North American corporate history.
Lucent, which launched its restructuring in January, said it still expects to close the $2.75 billion sale of its fiber-optic cable unit to Furukawa Electric Co. Ltd. and Corning Inc. by the end of the calendar year. It also still plans to spin off the rest of its Agere stake.
Lucent had said it would take a restructuring charge of $7 billion to $9 billion in the fourth quarter as it continued slashing its work force from 106,000 in January.
It said Tuesday it remains on track to cut that total to a range of 57,000 to 62,000 by the end of March, from 77,000 Sept. 30.
Its $8 billion charge consisted of $4.6 billion of asset write-downs, $1.1 billion for employee separations, $1.2 billion for a voluntary retirement offer, about $850 million in other restructuring charges and $282 million for a pension curtailment charge.