Lucent to cut 10,000 jobs, sell plants

Computer World –

Under the gun of analysts and investors, financially troubled Lucent Technologies Inc. today outlined an aggressive restructuring program that would cut 10,000 jobs and sell two plants. The massive program is intended to reduce expenses and to reverse eroding revenue.

Today, the company reported that it lost more than $1.02 billion from continuing operations in its first quarter ended Dec. 31. Lucent earned $1.08 billion in profits from continuing operations in the same quarter a year ago. First-quarter revenue from continuing operations dropped 26% from the prior year, to $5.84 billion.

The extreme initiative includes eliminating 10,000 salary positions, either through attrition or layoffs. The layoffs and other elements of Lucent's plan are aimed at trimming $2 billion in expenses by the end of the fourth quarter and reducing working capital by another $2 billion at the same time, said Lucent Chairman and CEO Henry Schacht in an analyst briefing.

A slowdown in capital spending by established telecommunications service providers, weakness in the competitive local exchange carrier market and lower software sales have all hurt Lucent's bottom line.

Schacht said the jobs would be eliminated in nearly all business groups and across geographic areas. He said those employees who are affected would be notified by mid-February. He said the plan includes a one-time restructuring charge of $1.2 billon to $1.6 billion that would come in the second quarter.

In addition to the massive job cuts, Lucent also plans to sell manufacturing operations in Oklahoma City and Columbus, Ohio, Schacht said.

Company spokeswoman Mary Lou Ambrus said Lucent will sell the Oklahoma City plant, which makes network switching and access products, to an unspecified contractor that will make the same products on behalf of Lucent. Many of the 4,000 workers employed in Oklahoma City are "highly skilled people," Ambrus said, "and the goal is for as many as possible to become employees of the contractor."

The company also plans to sell all or part of its Columbus, Ohio, plant, which makes wireless products, and move production to a contractor, Ambrus said. That, she noted, "could possibly affect up to 2,000 of the 4,400 workers" employed there.

The plant closings and restructuring would reduce Lucent's work force to 107,000.

Schacht said that in its effort to reduce working capital by $2 billion, Lucent would hire a new executive who would aggressively manage inventory and accounts receivables across all business units. That person, Schacht said, would report to Lucent Chief Financial Officer Deborah Hopkins.

Lucent will also work toward reducing capital spending by as much as $400 million by year's end, Schacht said.

Lucent plans to secure $4.5 billion in loans to ensure adequate cash flow over the next 12 months, Schacht said. So far, J.P. Morgan Chase & Co. and Citigroup Inc. have committed to $1.25 billion each.

David Willis an analyst at Meta Group Inc. in Stamford, Conn., said, "Certainly, given the financial problems [at Lucent], their actions, including the layoffs, really come as no surprise. They have a lot of fat to trim."

Willis said that, in many respects, Lucent is still coming from an "old world" telecommunications company model, annd that the company's problem is "cultural as well as financial." He said Lucent is still a formidable competitor in telecommunications equipment sold to carriers, but that the company is neither as fast nor as agile as it needs to be to meet the changing needs of its customers.

"It's going to take time for them to become nimble given their background," he said.

Lucent has also filed to spin off its growing microelectronics business as a separate, publicly traded company called Agere Systems. Neville Shah, a research associate at Thomas Weisel and Partners LLC in San Francisco, said the deal could pump cash into Lucent.

The $33.8 billion company had a tumultuous 2000. In July, it warned that fourth-quarter earnings would be lower than expected. In October, it warned again about earnings and ousted Chairman and CEO Richard McGinn. In November, the Murray Hill, N.J.-based company disclosed that it would have to restate fourth-quarter results, shaving $125 million from the company's sales -- a figure that ballooned to $679 million as part of last month's announcement.

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