Agere Systems cuts another 4,000

Following the lead of other optical component and semiconductor companies, Lucent spinoff Agere Systems today announced 4,000 more layoffs, a reduction in manufacturing capacity, and up to $900 million in one-time charges to pay for the restructuring.

Agere previously announced a work force reduction of 2,000 in April. The company said those cuts have “largely been completed.” A majority of the additional 4,000 job cuts are expected to take place by the end of 2001.

Agere also is taking steps to adjust its manufacturing capacity to be in line with slackened demand. Agere executives said the company is “actively seeking” a buyer for its chip fabrication plant in Madrid, Spain--an operation it expects to shut down by the end of the year. The plant currently operates at less than 25% of capacity, Agere executives said. About 1,000 of the new 4,000 job cuts will come from discontinued Madrid operations.

Underused manufacturing facilities in Orlando, Fla., and the Pennsylvania cities of Allentown, Breinigsville, and Reading also are being consolidated. Several satellite manufacturing sites and leased corporate offices face a similar fate.

“We built our business to serve a growing market, which is instead deteriorating. We continue to see softness across our business,” said John Dickson, president and CEO of Agere. “While we deeply regret the impact of these actions on our employees, we must focus on creating an appropriate cost and expense structure.”

Although Agere expects pre-tax savings of $520 million annually from the cutbacks, it first has to take a $720 million charge in the June quarter. The remaining $180 million in charges will be booked in subsequent quarters.

Business restructuring charges for the June quarter will total $470 million, with $145 million in cash charges for severance payments, contract terminations and non-cancelable lease obligations. The rest consists of non-cash charges related to the write-off of capital assets. Another $255 million of the $725 million charge will be for non-cash charges associated with an inventory writedown.

“We had ramped up in anticipation of customer demand, which didn’t materialize, resulting in excess and obsolete inventory, especially in the optoelectronics business,” said Mark Greenquist, Agere’s chief financial officer.

As a result of the charges, Agere expects to post a pro forma net loss of about 30 cents per share for the June quarter. Excluding the charges and including full realization of income tax benefits, Agere executives now expect the company to record a pro forma operating loss of 8 cents per share in the quarter, a penny more than the previous average estimate of analysts surveyed by First Call/Thomson Financial.

Agere also slightly lowered its revenue guidance to $920 million from a previous range of $950 million to $1 billion. The company reports its fiscal third-quarter earnings on July 25.

Lucent still owns 58% of Agere and is trying to raise an additional $2 billion by September 30 to complete the spinoff.