Premier telecommunications equipment maker Lucent Technologies Inc.’s woes continued last week as it revised its first-quarter earnings downward while announcing an overhaul plan that will involve $1 billion in cost cuts and job layoffs.
The company said it expects to report a pro forma loss of 25 to 30 cents per share for the first fiscal quarter of 2001, ending Dec. 31.
“Lucent got off track because we tried to grow our company faster than, in hindsight, we were able to,” said company chairman and chief executive officer Henry Schacht, who expressed optimism that Lucent will overcome its problems next year.
The company’s troubles, which continue to reflect in its stock performance with an 80-percent dive in the past year, challenge the company’s managerial resources.
Schacht attributes the first-quarter warning to significant sales declines due to hiccups in the competitive local exchange carrier (CLEC) market, a slowdown in capital spending by established service providers, decreased software sales and more selective use of vendor financing.
He acknowledged the views of analysts that the company allowed competitors like Nortel Networks, Cisco systems and Hewlett-Packard Co. to edge past it in optical networking technology.
He also said the company put its priority in short-term financing instead of long-term.
The company will cut $1 billion in costs to concentrate on high-growth areas such as sales and marketing, removing duplication and also targeting the service provider market.
“In the second half of the year, the significantly reduced expense levels will take hold,” he said.
The company drew litigation from shareholders when it announced that it overstated its fourth-quarter estimates due to an accounting error. The fourth-quarter forecast now stands at $8.7 billion in revenue and EPS of 10 cents, against its Oct. 23 report of $9.4 billion in revenue and EPS of 18 cents.
The company said its restructuring plan will involve the rationalization of various product lines, consolidation of corporate center functions, elimination of duplications in marketing functions and streamlining of sales support functions as the company moves technical resources closer to its customers.
Lucent said it will give details of the plan when it announces its first fiscal quarter results in January.
Standard and Poor’s lowered the company’s short-term ratings from `A1′ to `A2′ and senior ratings to `BBB+’, although it says Lucent will remain on CreditWatch. S&P will complete its full review in January or February and says it is still likely to confirm the present ratings.
Rumors have floated throughout December that Nokia and Alcatel were contemplating taking over Lucent, but both companies have denied any such move.
