Lucent to lay off 10,000

(Telephony) As many as 16,000 current employees of Lucent Technologies will be slashed from the vendor’s payroll this year as part of a new restructuring plan designed to reduce operating costs by $2 billion.

The embattled equipment maker said it will cut its net headcount by 10,000 employees-about 10% of the current workforce-by July through a combination of layoffs and attrition. By the end of the year, another 6,000 jobs will be transferred outside the organization in an effort to significantly expand the outsourcing of manufacturing to contractors. Lucent previously announced plans to sell plants in Oklahoma City and Columbus, Ohio.

The majority of laid-off employees will be notified between now and February 15, with virtually all informed by early March. The cuts will come from marketing, sales and administration across all geographic regions as well as from elimination of some product lines. “As a result of our product portfolio review, we’re discontinuing some product lines, merging some technology platforms and consolidating some development activity,” said Henry Schacht, Lucent’s chairman and CEO.

The restructuring will cause Lucent to take a one-time charge of between $1.2 billion and $1.6 billion in the second quarter to cover job reductions and associated writedowns and facility consolidation. However, most of the improvement from the operating expense reductions won’t be evident until the second half of fiscal 2001, Schacht said.

Another part of Lucent’s restructuring plan call for a $2 billion reduction in working capital by the end of fiscal year 2001. Lucent plans to appoint an executive to lead a company-wide program to promote aggressive management of inventory and accounts receivables across all product lines.

Additionally, Lucent plans to cut capital spending by $400 million this year. To ensure its cash flow needs are met, Lucent announced a new $4.5 billion credit facility arranged by J.P. Morgan and Salomon Smith Barney.

“As we saw a dropoff of revenues and a drain on financial resources, we felt it was paramount to move swiftly to ensue continued access to liquidity,” said Deborah Hopkins, chief financial officer of Lucent. “With the completion of this facility we are on track for the IPO and spinoff of Agere.”

For Lucent’s first fiscal quarter of 2001 ending December 31, 2000, the vendor posted a pro forma loss from continuing operations of $1.02 billion, or 30¢ per diluted share, compared with pro forma earnings of $1.08 billion, or 33¢ per share in the year-ago quarter. The quarterly loss was slightly higher than analysts’ already reduced expectations of a 27¢ per share loss, according to First Call/Thomson Financial.

Including charges of $372 million in amortization of goodwill and other acquired intangibles, an after-tax gain of $1.15 billion form the sale of Lucent’s Power Systems business and a $30 million after-tax effect due to a change in the accounting of derivatives, Lucent recorded a net loss of $395 million or 12¢ a share.

Pro forma revenues from continuing operations were $5.84 billion for 2001’s first quarter, a decline of 26% from the $7.91 billion in 1999. Sales to service providers decreased 36%, or $2.5 billion, to $4.3 billion, although sales to large incumbent regional service providers increased 7%. U.S. revenues decreased 40% overall. According to Hopkins, the slowdown in service provider and domestic sales was attributable to the “softening” of the CLEC market, lower software sales, more selective use of vendor financing and a change in Lucent’s distribution practices.

“During the last two weeks of the fiscal quarter, we saw an even greater than expected impact in the slowdown in capital spending by our customers, especially in North America, and particularly in areas such as high margin software products,” Hopkins said. “Quite frankly, we walked away from some end-of-year bargain deals. It took some pain to instill some discipline and create a platform for a future, profitable business.”

As part of the company’s salesforce realignment, Lucent’s North American salesforce will now take a more targeted approach within the CLEC market and redeploy resources against large incumbent service providers and international markets, Hopkins said. Lucent’s move to a fulfillment model with its distributors means that it now records revenue only after a product has been delivered to an end customer.