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Lucent Airs Another Crimp in Telco Sector

Putting yet another crimp into the phone equipment sector, Lucent Technologies said it expects a 10 to 15 percent decline in revenues for the third quarter, compared to its $3.52 billion second quarter.

The Murray Hill, N.J.-based company, said to be the largest provider of telecom equipment in the world, cited "continuing market softness." The market sent the stock down 11 percent in mid-morning trading, to $2.61, off 34 cents.

The entire sector has been battered as businesses have cut back on spending while the market downturn drags on and on.

Finnish wireless giant Nokia made money for its first quarter, but cut its sales forecast for the rest of the year. Swedish phone maker Ericsson reported a loss of $289 million and said that it would cut roughly 20 percent of its workforce and try to raise almost $3 billion to cope with its situation.

"Service providers continue to constrain their capital spending to conserve cash, which is clearly affecting our top line," said Lucent's CEO, Patricia Russo, who pointed out that the company is seeing declines primarily in wireline systems in North America.

The company said that "while sequential improvement over the (second quarter) 14-cent loss, which excludes a six-cent tax charge, is possible for the third fiscal quarter, the company feels that it is too early to call given current market conditions."

For the six months ending in March, Lucent's revenues fell 31 percent to $7.1 billion.

"We remain focused on controlling those things we can control and our aggressive restructuring program continues to produce results ..." Russo said, adding that "when the market turns around, we will be well-positioned to profitably grow the business."

Lucent's CFO, Frank D'Amelio, indicated that the company remains on track with its restructuring efforts (30,000 jobs are being eliminated) and still expects to reach an employee base closer to 50,000 by the end of its fiscal year. The company continues to target a return to profitability and positive cash flow during fiscal 2003.