Lucent posts mammoth loss

Lucent Technologies reported a shaky fiscal fourth quarter highlighted by a larger-than-expected operating loss, a 28% drop in revenues and an $8 billion restructuring charge.

Excluding one-time items, Lucent lost $909 million, or 27¢ per diluted share, compared to a loss of $11 million, or breakeven on a per-share basis, for the same period last year. Including business restructuring and other one-time charges and a $1.5 billion loss associated with Agere, Lucent lost $8.8 billion, or $2.59 per share, compared with a net loss of $484 million, or 14¢ per share, in the year-earlier period.

Lucent expects the equipment market to decline 15% to 20% in 2002 and its target markets to decline about 10%.

“We think industry spending in the first fiscal quarter of 2002 will be even lower than these levels due to the increased uncertainty after the Sept. 11 tragedies and the spending patterns of our large North American customers,” said Henry Schacht, chairman and CEO of Lucent.

Revenues declined to $5.2 billion from $5.9 billion in the previous quarter. Sales to Lucent’s North American customers were down 15% to 20% during the quarter, while international sales growth was flat. Sales in China were particularly strong, however, as were sales of wireless infrastructure products.

Lucent said the implementation of the second phase of its restructuring actions would mean a return to profitability and positive cash flow in fiscal year 2002. Specifically, Lucent aims to improve lackluster gross margins (12.5% in the quarter); further reduce operating expenses, working capital, and capital spending; and continue slashing people from its payroll.

According to Lucent’s Chief Financial Officer Frank D’Amelio, the company’s goal is to be breakeven at a quarterly revenue run rate of $4.75 billion.

Lucent cut its work force by 18,500 as of September 30, ending the quarter with 77,000 workers. The company plans to reach its target of 57,000 to 62,000 employees through further job reductions, attrition, outsourcing plans, and the completion of the sale of its optical-fiber business.

During the quarter, Lucent also cut operating expenses 35% sequentially, to $1.18 billion, and reduced R&D spending by 6% through “product rationalization efforts.” The company declined to specify which products would be on the chopping block in the months ahead.

Lucent also improved its balance sheet, as inventory turns improved 17% and days sales outstanding (DSOs) decreased 34 days compared to the year-ago quarter. As of Sept. 30, Lucent had a cash balance of $2.4 billion, aided by $1.9 billion in gross proceeds from a convertible preferred stock offering and $572 million in proceeds from the sale of manufacturing operations. The company said the sale of the optical-fiber business to Furukawa of Japan is still on track and should close in the current quarter.

Lucent’s $8 billion charge included $4.6 billion in asset write-downs, $1.1 billion related to layoffs, and $1.2 billion for its voluntary retirement offer. About $1.4 billion of the total was cash-related.