Lucent Makes $780 Million Correction
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Lucent Technologies officials Thursday revised fourth quarter 2000 revenues from $9.7 to $8.4 billion, announced its $1 billion cost-cutting intentions and warned of revenue shortfalls throughout 2001.
All in all, not the type of announcement Lucent officials expected or wanted to end the year with. The news obviously wasn't well-received by investors, either.
The revised revenue numbers is a $700 million oversight that sent the telecommunications company, and Nasdaq, into freefall as investors fled the high-tech sector. Nasdaq's index dropped below 2,300 mid-morning after the news, from approximately 2,350 that morning, at about the same time Lucent's value flatlined at a little over $12 per share.
The bulk of the revenue losses for the quarter come from equipment contracted but not sold to customers. Rather than demand the money and ruin its relationship with these distributors, Lucent decided to swallow the $452 million loss, attribute the loss to the fourth quarter, and resell at a later time.
The service provider industry has taken huge losses in the stock market lately as the cost to deploy high-speed Internet access erases any revenues gained from subscribers. Schacht said the result is a slowdown in deployment, which means a decreased need for the equipment that runs the broadband lines.
"These expectations reflect a significant sales decline in North America due to an overall softening in the competitive local exchange carrier market, slowdown in capital spending by established service providers, lower software sales and a more focused use of vendor financing," Schacht said.
Henry Schacht, Lucent chairman and chief executive officer, said the company is going to swing a $1 billion cost-cutting axe to bring revenues and losses back in line.
"Fiscal year 2001 will be a rebuilding year, a turnaround year for Lucent," Schacht said. "We have identified the issues we must tackle, and we are undertaking a major re-tooling 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."
The restructuring process, which will continue throughout 2001, will bring Lucent back to market growth in 2002, Schacht said.
Agere Systems, the newly-named spinoff of Lucent's microelectronics division, is currently in the quiet period of its initial public offering, announced this summer. Officials said they are on schedule for a late first quarter IPO.
Samantha Baxter, spokesperson for Agere, said the spinoff "is not affected" by the current crop of bad news from its parent company.
Lucent also intends to continue with the sale of its Power Systems division to Tyco International.