- Lucent Technologies is finalising a restructuring plan following a warning that it expects to report a "significant" loss for the current quarter - and disclosing that its revenue total for the previous three-month period was being reduced by $US679 million.
The beleaguered Murray Hill, New Jersey-based vendor of networking and telecommunications equipment says it's in the process of finalising a restructuring plan aimed at reducing its costs by more than $US1 billion. The corporate makeover is due to include workforce reductions, a rationalisation of various product lines, administrative and marketing consolidations and a streamlining of sales support functions.
The cost-cutting actions will be detailed when Lucent announces the final results for its fiscal first quarter late this month. The company says a review of its internal business processes will continue throughout next year and may result in additional cutbacks aimed at lowering expenses.
The current fiscal year "will be a rebuilding year . . . for Lucent," says Henry Schacht, the company's interim chairman and CEO. "We have identified the issues we must tackle, and we are undertaking a major retooling of the business. We are looking for a fresh start in the new year as we implement our restructuring and get our company back on track."
For the quarter ending this month, Lucent says it anticipates reporting a loss of 25 to 30 cents per share, with revenue from continuing operations declining about 20% from the same period last year. Schacht says the pessimistic outlook "reflect(s) a significant sales decline in North America" due to a softening in purchases by telecommunications carriers and other factors.
Lucent, which turned to onetime CEO Schacht after firing top executive Richard McGinn two months ago, also is restating the fiscal fourth-quarter results it reported at the same time. Revenue is now being pegged at $US8.7 billion instead of the $US9.4 billion that was originally announced by the company.
In November Lucent said it had discovered a $US125 million revenue shortfall for the fourth quarter ended September 30. Then in December the company detailed another $US554 million in revenue reductions, including $US452 million worth of products that it's taking back from distributors and systems integrators after they couldn't find users for the equipment.
In the case of the $US125 million that was previously identified, Lucent says there had been "misleading documentation and incomplete communications" between a sales team and its finance department over credits being offered to a customer in connection with a software purchase. The company adds that it's taking disciplinary action, including the firing of one employee.
Schacht -- who was CEO of Lucent from 1995 to 1997 and then continued as its chairman into early 1998 -- also has reorganised the company's senior management team, giving new or expanded duties to four executives.
Schacht says Lucent is aggressively searching for a new CEO and adds that he's committed to filling that job for as long as necessary. "But I am 66, and please let me know if you know how to fix that," he jokes.
"Lucent right now is its own worst enemy," says Eric Goodness, an analyst at Gartner Group in Stamford, Connecticut. The company should be able to suffer through its ongoing problems without completely collapsing, Goodness says. But, he adds, it "really need(s) to find leadership that can stop the hemorrhaging."
Lucent is being hit on two fronts, according to Goodness: start-up providers of digital subscriber line (DSL) services are having their own financial problems, resulting in reduced sales opportunities for vendors such as Lucent, and the company faces stiff competition from other makers of telecommunications equipment such as Sycamore Networks in Chelmsford, Massachusetts, and Juniper Networks in Sunnyvale, California.
The planned cutbacks due to be detailed next month will be in addition to earlier restructuring moves announced by Lucent, including a spin-off of the company's microelectronics unit into a separate business called Agere Systems and the sale of its power systems group to Bermuda-based Tyco International.