CHICAGO – Lucent Technologies Inc. (LU) on Monday posted its eighth consecutive quarterly net loss, and said it would cut more jobs and possibly take more charges in its efforts to return to profitability amid the spending slowdown in the global telecom industry.
Lucent , the world's largest telecommunications equipment maker, which launched its massive restructuring in January 2001, said it will cut its work force to close to 50,000 by the end of September from 56,000 at the end of March. It repeated it will return to profitability during fiscal 2003, and said more cost cutting will be needed, but did not say whether that means more job cuts.
The Murray Hill, New Jersey-based company said its fiscal second-quarter net loss narrowed to $535 million, or 16 cents a diluted share, compared with a loss of almost $3.69 billion, or $1.09 a diluted share, a year ago. Revenues on an ongoing basis in the quarter ended March 31 fell to $3.52 billion from $5.33 billion. Revenues rose 1.4 percent over first-quarter sales.
"Given the continuing market uncertainty, it's clear that our break-even point will need to be lower than the $4.25 billion (on a quarterly revenue basis) that we had planned," Lucent Chief Executive Patricia Russo said in a statement.
"We are now working toward a break-even revenue figure that will be somewhat below $4 billion," she added. "This will mean identifying opportunities for further reductions and productivity improvements, which we are exploring now."
Russo said that could result in an additional restructuring charge "significantly less" than the initial charge of $2.7 billion it took for its Phase I restructuring in January 2001. She did not quantify how much the charge could be.
Sources close to the company had previously told Reuters that Lucent would reduce its work force from the 55,000 it previously targeted to about 50,000.
Analysts appeared satisfied with Lucent's efforts during the telecom spending slowdown, citing a stronger-than-expected improvement in gross profit margins, stabilized revenues and success spinning off its stake in Agere Systems Inc.
"In this environment, these results are very good," independent analyst Tom Lauria said. "There's no question Lucent is making improvements. They've managed to prove that they can hold their own."
However, he believes Lucent will likely need to cut another 5,000 jobs below its current target of 50,000.
Lucent, which said it has met all financial conditions in order to spin off the rest of its stake in Agere in June, also said it will improve its earnings in the third quarter assuming no change in revenues, but did not provide a forecast on sales. Analysts expect Lucent to post a loss of 11 cents before one-time items in the third quarter, with a range of loss estimates from 3 cents to 20 cents, according to research firm Thomson Financial/First Call.
Lucent's second-quarter pro forma loss was $631 million, or 20 cents a share, including a charge of 6 cents per share related to new tax laws. That compared with a loss of $1.39 billion, or 41 cents a share, in the year-ago quarter.
Last month, Lucent lowered its fiscal second-quarter outlook, saying revenues would show a "modest to 10 percent" rise from the previous quarter, down from a previous forecast of 10 percent to 15 percent growth. It also repeated it expected to improve on its first-quarter loss of 23 cents a share before one-time items.
Analysts had expected Lucent to report second-quarter revenues of $3.57 billion and a loss before one-time items of 17 cents a share, with loss estimates ranging from 11 cents to 22 cents, according to First Call.
TELECOMS EXPECTATIONS: UP FROM ROCK BOTTOM
Lucent warned last month its return to profitability would be delayed from the current fiscal year to 2003. Expectations are already rock bottom for Lucent and competitors, given tepid telecom spending by major players.
The industry has not yet shown signs of a long-awaited recovery, as carriers such as Qwest Communications International Inc. , Sprint Corp. and Verizon Communications , all large Lucent customers, have continued to slash spending.
Lucent rival Nortel Networks Corp. last week posted a huge drop in first-quarter sales. It also said it expects neither a significant upturn nor a downturn in second-quarter revenues.
Lucent also said Monday its gross profit margins improved 9 percentage points from the previous quarter to 23 percent, far better than many analysts had expected, mostly due to an improved product and geographic mix, and cost reductions. It has targeted a return to 35-percent gross margins in fiscal 2003, a level some analysts have doubted it can reach in that time frame.
The spinoff of Lucent's remaining 58 percent stake in Agere, its former semiconductor and optical components unit, will be done on June 1 to shareholders of record on May 1 at a distribution rate to be determined later.
Lucent's stock has declined 68 percent since the start of 2001, when it launched its restructuring, matching the decline by the American Stock Exchange Networking Index in the same time period.
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