Lucent sees greater revenue decline, cuts more jobs

The week ahead isn’t looking pleasant for Lucent Technologies. The company revealed this morning that its fourth quarter loss per share will be much greater than the previously announced $0.45 per share. Lucent also expects a 20% to 25% sequential decline in revenue from the third quarter.

“It feels like we are in the eye of the storm,” said Lucent CEO Pat Russo, adding that she doesn’t expect to see such a sharp decline in 2003 as has been experienced in 2002.

The vendor plans to slash an additional 10,000 jobs, bringing the total headcount to 35,000, rather than the previous estimate of 45,000. Lucent intends to complete the majority of the reductions as quickly to return to profitability as quickly as possible, according to CFO Frank D’Amelio,. Those cuts will happen across the board and across all geographic regions.

Lucent will take a restructuring charge of $1 billion associated with the changes. It also will take a $3 billion charge to equity because of a decline in pension assets in the company’s management pension plan.

As of September 30, Lucent had $4.4 billion in cash and securities and expects to have more than $2 billion in cash at the end of fiscal 2003, according to Russo. The company’s breakeven point was lowered to $2.5 billion from the previous target range of $2.5 billion to $3 billion.

Lucent also cancelled a $1.5 billion credit facility, which had not been drawn against.

With the additional cuts in staff and revenue decline, the company is scrutinizing all of its product lines. Russo targeted the areas of optical, circuit and packet switching, mobility, network operations software and services as the pillars of the company. That obviously leaves a gaping hole for the access products, which many industry sources feel should go.

With regard to the access business Russo said, “[We are] investing to support existing customers and continue to look for profitable opportunities where that makes sense. But our eyes there are toward profitability as opposed to just volume.”

The company will reveal further details regarding its product line strategy during its October 23 earnings call.

“Our top priority is profitability and cash return,” Russo said, regarding to the changes revealed today.