Lucent to accelerate turnaround effort

ATLANTA—Fresh off the demise of the Alcatel deal, Lucent Technologies CEO Henry Schacht said today that the company will be accelerating its turnaround plan and announcing further product pruning, cost reduction measures, and financing arrangements in the next few days and weeks. He also said that Lucent is the process of closing the sale of its fiber optic cable unit.

Schacht would not speculate on specific moves or additional job cuts, except to say that Lucent would exit its fourth quarter having cut its payroll by 10,000 people, as previously announced.

“It’s just blocking and tackling; there’s no rocket science here,” Schacht said. After the restructuring is complete, Shacht said, Lucent would be “a smaller, nimbler, more focused and profitable company that concentrates on the top 30 major service providers worldwide.”

Schacht also emphasized that Lucent was determined to execute its turnaround on its own and that a renewal of merger talks with Alcatel or any other possible suitor is “almost inconceivable.”

According to Schacht, Lucent’s decision to break off promising merger negotiations with Alcatel in the eleventh hour arose from a conviction on both sides that an integration of the two large vendors wasn’t executable. 

“It was a conclusion that we arrived at reluctantly and after very careful consideration,” Schacht said. “Our willingness to turn down Alcatel is a sign of our confidence in the turnaround.”

In a meeting with analysts, Schacht reiterated Lucent’s previous financial guidance for its fiscal third quarter, saying that the company would show modest sequential growth over the $5.92 billion of revenue in the second quarter and greater sequential improvement over the 37¢ per share loss in the second quarter. “On the top line, we review our sales outlook weekly,” Schacht said. There is no question the market is soft.”

Although Lucent is not facing a liquidity problem, the company has until September 30 to raise $2 billion from non-operating sources to satisfy the requirements of its spinoff of Agere Systems. The sale of the fiber unit is the primary means of raising that money, but if Lucent doesn’t have the cash from the sale in time to meet the deadline, it will explore alternative financing deals, Schacht said.

Although the market for telecom equipment is soft, Schacht said there’s plenty of demand for Lucent products from the large service providers, which have cut only a small portion of their large capital expenditure budgets. “They’re leaving a very large residue of spending,” he said.
Vince Ryan is Business Editor for Telephony. He can be reached at vryan@intertec.com.