Lucent boosts productivity cutting INS, mobility evenly

Lucent Technologies increased its average gross profit per employee by nearly 23% to $30,660 in its fiscal year 2004, according to the company’s recently filed 10-K report to the Securities and Exchange Commission. And although the company’s mobility and INS segments reported significantly different trends in revenue growth for the fiscal year (which ended Sept. 30), Lucent reduced the workforce of each segment in relatively equal proportions.

Revenue from Lucent’s INS division (which includes optical, voice and data networking and network management) sank 10% in the company’s 2004 fiscal year to $2.98 billion, while the segment’s income more than tripled to $345 million. Meanwhile, revenue from Lucent’s mobility segment rose 30% from the previous fiscal year to $4 billion, and the segment’s income grew more than 600% in the year to $1.24 billion.

However, although Lucent cut 200 more INS employees than wireless employees during the fiscal year, the company cut each group’s staff in similar proportions. The number of employees in Lucent’s INS group shrank 24% in fiscal 2004 to 5,300 employees, while the number of wireless employees decreased about 25% to 4,500 employees.

Forty-six percent of Lucent’s total revenue came from its mobility division in fiscal 2004 (an increase from previous years) while 33% came from INS (less than in previous years).

The largest number of Lucent employees--nearly a third of its total 31,800-employee workforce--work for the company’s services business, which experienced only a 9% reduction in staff during the fiscal year amid a 5% increase in revenue (to $1.9 billion) and a 57% increase in income (to $282 million). Services contributed 21% of Lucent’s total revenue in fiscal 2004, down slightly from the previous two years.

Lucent attributed the yearly decline in INS revenue primarily to spending cutbacks at AT&T, which had completed some specific spending programs in Lucent’s fiscal 2003. Other U.S. carriers also spent less on circuit-switched voice equipment in favor of broadband and next-generation gear the company’s filing said. Within the INS group, revenue decline was sharpest in voice networking, which sank 14% in the fiscal year to about $1.34 billion. The INS income boost came from cutting $100 million in operating expenses while gross margins in the segment rose $143 million, Lucent said.

The company attributed the success of its wireless group to sales of CDMA equipment to Asian carriers as well as to Verizon Wireless and Sprint PCS, which together accounted for 61% of Lucent’s mobility revenue for the year. The mobility group’s income growth was achieved in part by cutting $247 million in operating expenses, mostly through cuts in research and development made possible by "relocating certain activities to areas with lower cost structures," Lucent said.

Research analysis firm Lehman Brothers believes Lucent outsources about 90% of its manufacturing to companies such as Celestica, Solectron and Sanmina.