Lucent's Q1 loss brings 10,000 job cuts

ITworld.com |  Networking

The Murray Hill, New Jersey-based company warned last month that its Q1 losses would be wider than expected, blaming the shortfall on an overall softening in the CLEC (competitive local exchange carrier) market, slowdown in capital spending by established service providers, lower software sales and a more focused use of vendor financing.

The tale of the rise and fall of Lucent demonstrates the fast-moving nature of today's financial markets. "This company was once the darling of Wall Street," said Lawrence Orans, an analyst for high-tech research firm Gartner Group Inc. "The cracks have been showing for a year or so now." He said Lucent was particularly hurt by its investments in CLECs, financing their equipment purchases on the assumption that as they became profitable the loans would be repaid. The CLECs were hit with the same thing that hit the dot-coms -- an emphasis on immediate profitability -- and their losses trickled up to Lucent, Orans said.

The once high-flying Lucent was spun off from AT&T Corp. in September 1996 and quickly emerged as an important player in the networking and telecommunications equipment markets. But that all changed when the networking market went sour at roughly the same time that Lucent experienced the fallout from some missteps, including being late launching an OC-192 product based on the SONET (Synchronous Optical Network) standard. That led to lower revenue than expected and decreased margins in the optical business, officials said in October of last year when the company announced it had fired Chairman and CEO Rich McGinn and that fourth-quarter earnings would be disappointing.

Soon after that, the company restructured top management to integrate sales and service and said it would cut jobs. In December, an investor filed a federal lawsuit in New Jersey alleging that investors were misled between Oct. 10 and Nov. 21 of last year when the company first reported its fourth-quarter earnings and then downgraded them. The suit alleged that McGinn was motivated to report inflated revenue and earnings to try to keep his job, which was imperiled.

Lucent Technologies, in Murray Hill, New Jersey, can be reached at +1-908-582-8500 or at http://www.lucent.com/.

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