10,000 Jobs Cut at Lucent
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A devastating fiscal year-end loss of $1.02 billion, coupled with a first-quarter loss of $395 million, propelled Lucent cut 10,000 positions and implement a seven-point restructuring plan Wednesday.
The job cuts, which account for 10 percent of its workforce, were primarily focused in the marketing, sales and corporate center functions.
The company's goal is to reduce expenses by $2 billion, improve working capital by approximately $2 billion and significantly improve cash flow, according to Henry Schacht, chairman and CEO.
"We are outlining a comprehensive set of actions to rebuild the company for long-term, sustainable profitability," said Schacht. "We are moving swiftly to implement these actions companywide. They will serve as the foundation for putting Lucent back on track."
Lucent posted a basic and diluted loss per share of 30 cents for the first fiscal quarter ended Dec. 31, 2000, compared with pro forma earnings from continuing operations of $1.08 billion, or diluted earnings per share of 33 cents a year ago. Pro forma revenues from continuing operations for the first quarter were $5.84 billion -- down by 26 percent from a year ago.
"Several issues impacted our results in the quarter," said Deborah Hopkins, Lucent's chief financial officer. "Many of them were Lucent-specific. We walked away from some business that would not have been profitable. The realignment of our sales force, our implementation of a more selective vendor financing program and the initial impact of the move to a fulfillment model with distributors also had a negative impact on sales in the quarter," she said.
"In addition, like many other companies, we were affected by the softening of the competitive local exchange carrier (CLEC) market and consolidation in the industry, which resulted in some companies refocusing their business strategies and delaying some spending. We expect to see improvements next quarter," she said.
The newly implemented restructuring program includes:
- A one-time charge in the range of $1.2 billion to $1.6 billion in the second fiscal quarter of 2001 as part of its business restructuring program.
- Eliminating some product lines.
- Achieving the net 10,000-employee reduction while continuing to hire people with specific skills to enhance its capabilities in profitable, high-growth markets.
- Significantly expanding its previously announced plans to use contract manufacturers, which is expected to result in about 6,000 fewer positions by the end of the fiscal year.
- Appointing an executive, who will report to Deborah Hopkins, Lucent's chief financial officer, to lead a companywide program to reduce working capital through aggressive management of inventory and accounts receivables across all product units.
- Reducing its capital spending by $400 million by fiscal year end.
To ensure that Lucent's cash flow needs are adequately met, the company also announced $4.5 billion, 364-day term credit facilities arranged with J.P. Morgan and Salomon Smith Barney. An affiliate of J.P. Morgan Chase Co. and Citicorp North America Inc. have each agreed to commit $1.25 billion for a total of $2.5 billion of the facilities.
"Lucent will continue to review its internal processes throughout fiscal year 2001, which may result in additional cost structure improvements and associated business restructuring charges as it moves from a multi-divisional company to one with a single focus on the service provider market," said Schacht.
Meanwhile, the company is losing green in other ways. According to a report in Wednesday's New York Times the telecom equipment maker is trying to unload a golf club in New Jersey that it spent more than $40 million trying to develop as an exclusive retreat.
At press time, the company's stock
was selling at 18
13/16; its 52-week range is 12 3/16 - 75