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Lucent: More Layoffs, Losses, Fire Sale

Struggling telecom giant Lucent Technologies Inc. unleashed a torrent of news this morning in its third-quarter financial report--the elimination of up to 20,000 more jobs, a billion dollar loss that was bigger than Wall Street expected, a fourth-quarter restructuring charge of up to $9 billion and the end of dividend payments.

While Lucent also sold off its fiber-optic cable business in a complicated deal, the $2.75 billion the sale will bring is less than what experts had anticipated. But a sale of some of Lucent's manufacturing assets and an associated manufacturing deal will add to its coffers up to $10 billion over the next five years.

Murray Hill, N.J.-based Lucent said it lost $1.89 billion or $0.55 cents a share in the third quarter, including a $684 million restructuring charge and amortization of goodwill and other acquired intangibles. That figure is a complete turn-around from last year's fiscal third quarter, when Lucent earned $286 million or $0.09 cents a diluted share.

Lucent said its loss from continuing operations totaled $1.2 billion or $0.35 cents a share in the quarter, compared with a profit of $776 million, or $0.23 cents in the year-ago period. A consensus of analysts' expectations as measured by Thomson Financial/First call showed that Wall Street expected Lucent to see continuing-operations losses of $0.21 a share.

Revenues from continuing operations, meantime, were down to $5.82 billion from $7.41 billion in the same period last year.

As part of its effort to return profitability and positive cash flow in fiscal 2002, Lucent implemented a "new phase of restructuring," including:

  • reduce annual operating expenses by an additional $2 billion;
  • improve working capital performance by an additional $1 billion;
  • reduce the company's capital spending rate by an additional $750 million;
  • reduce its work force by another 15,000 to 20,000.

Lucent's work force has already been cut by 19,000 since the beginning of the year, and the company has also eliminated 5,500 contractor positions.

In canceling its $0.02 per share dividend, meantime, Lucent said it will save $68 million in each fiscal quarter.

To pay for all of the streamlining, Lucent said it will take a charge totaling $7 billion to $9 billion in its fourth quarter, as well as write down additional assets.

Fiber Cable Sale a Done Deal

As expected, Lucent also sold its fiber-optic cable business in a deal valued at $2.75 billion to Furukawa Electric Co. Ltd. and Corning Inc. In the deal, Lucent will receive $2.525 billion from Furukawa for the major portion of the business. Corning will pay $225 million in cash for Lucent's interests in two joint ventures in China -- Lucent Technologies Shanghai Fiber Optic Co. Ltd. and Lucent Technologies Beijing Fiber Optic Cable Co., Ltd.

Also, Furukawa and South Carolina-based CommScope have agreed to enter into one or more joint ventures that will be formed to operate the OFS businesses. Up to $250 million of Furukawa's payment to Lucent may be in CommScope securities.

The sale to Furukawa, which is subject to regulatory approval and other customary closing conditions, is targeted to close toward the end of the third calendar quarter. Sale of Lucent's interest in the China joint ventures is subject to various approvals, including Chinese governmental approval.

The $2.75 billion figure is less than half what analysts had expected earlier this year, according to an Associated Press report.

"We're pleased to have received the best value for this business under difficult market conditions,'' said Bill O'Shea, executive vice president of corporate strategy and business development at Lucent.

Lucent's Optical Fiber Solutions business employs more than 6,000 people, with its headquarters and largest manufacturing facility located in Norcross, Ga., a suburb of Atlanta. It also has wholly owned and joint-venture facilities in Carrollton, Ga., Massachusetts, North Carolina, New Jersey, Connecticut, Denmark, China, Japan, Russia, Germany and Brazil.

The news on the fiber-optic cable sale was broken on Monday by The Wall Street Journal.

Lucent Also Sells Some Manufacturing Ops.

In related news, Lucent said it would gain money by selling its manufacturing assets at Oklahoma City and Columbus, Ohio to Toronto-based Celestica Inc., an electronics manufacturing services provider. Lucent also said the two companies have entered into a manufacturing supply agreement.

Lucent will transition its manufacturing operations at Oklahoma City and Columbus, Ohio to Celestica over the next few months. Celestica will pay Lucent between $550 million and $650 million in cash for Lucent's plant and property in Columbus, and equipment and inventory at both facilities. The final purchase price will be determined by the assets, primarily inventory, transferred at the time of the close. Celestica will lease the Oklahoma facility.

As part of this transaction, Lucent will enter into a five-year supply agreement valued at up to $10 billion with Celestica to be the primary manufacturer for Lucent's switching, access and wireless networking systems products.