Lucent has raise the tally......Now 16,000 jobs 1.2 billon chargegreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
01/24 11:06 Lucent to Shed 16,000 Jobs, Take Charge of $1.2 Bln (Update4) By Erik Schatzker
Murray Hill, New Jersey, Jan. 24 (Bloomberg) -- Lucent Technologies Inc., the biggest maker of phone equipment, said it will shed 16,000 jobs and take a fiscal second-quarter charge of at least $1.2 billion in a bid to return to profitability.
The cuts equal 15 percent of its workforce. Lucent will cut 10,000 jobs within six weeks and another 6,000 positions by year end by contracting some manufacturing to other companies. In all, Lucent said it expects to slash $2 billion a year in costs by its fourth quarter.
Lucent, led by Chief Executive Henry Schacht, is eliminating products, closing facilities and cutting jobs to revive a company that earned $1.25 billion in the first quarter of fiscal 2000. The projected savings are double the $1 billion Lucent targeted a month ago. At least one investor doubts the moves will help Lucent compete with Nortel Networks Corp. and others.
``I don't think they can restructure their way out of the problems they have,'' said portfolio manager John Simpson of Oechsle International Advisors LLC. ``They may be able to fix the financials, but they can't revive the underlying health of the business. They don't have the products to compete.''
Lucent rose 81 cents to $19.63 in late morning trading. The stock had fallen 63 percent in the past year.
The company said it has identified writedowns of $1.2 billion and expects the charge to increase by as much as $400 million by the end of the second quarter, which ends in March.
More Charges Possible
On a conference call, Schacht said additional charges are possible as Lucent continues to review its operations this year. He wasn't more specific.
While many of the cuts and related closures will be completed in the first half, Schacht said Lucent won't benefit from most of the savings until the second half of fiscal 2001.
Schacht plans to increase revenue and profit at the Murray Hill, New Jersey-based company in every quarter in fiscal 2001, ending in September. He declined to set more specific targets.
``We don't know if Lucent has bottomed yet,'' said Lehman Brothers Inc. analyst Steve Levy, who rates Lucent a ``neutral.''
For the first time, quarterly sales declined. Sales fell 26 percent to $5.84 billion in the first quarter ended Dec. 31. It's a bigger decline than the 20 percent drop Lucent had forecast. U.S. sales of phone equipment fell 40 percent.
``We walked away from some end-of-year bargain deals,'' Chief Financial Officer Deborah Hopkins said the call.
Gross margin, or the percentage of revenue left after production costs are subtracted, fell by more than half, to 22 percent in the first quarter from 47 percent a year earlier. Lucent attributed the plunge to lower sales.
Lucent had a first-quarter loss of $395 million, or 12 cents a share, compared with net income of $1.25 billion, or 38 cents, a year ago. Excluding costs for acquisitions, the company said it would have lost $1.02 billion, or 30 cents.
Lucent had forecast a loss of 25 cents to 30 cents a share in December. The company was expected to lose 27 cents a share, the average in a First Call/Thomson Financial poll of analysts.
While the restructuring plan is Schacht's, he may not be around long enough to see it through. The 66-year-old rejoined Lucent, a company he ran until January 1998, on an interim basis in October when CEO Richard McGinn was ousted.
``I intend to be CEO until we find a new CEO,'' Schacht said. He declined to say when that will happen.
Schacht said most of the jobs Lucent plans to eliminate are in sales and marketing and corporate functions and in areas where the company plans to eliminate products.
Lucent plans to drop 6,000 jobs in assembly, wiring and test functions by selling all or part of two plants in Columbus, Ohio, and Oklahoma City, and contracting that manufacturing out to other companies, Schacht said. Lucent didn't say what companies may be buyers for the plants.
Lucent has 106,500 employees, excluding those at the Agere Systems Inc. microelectronics unit slated for spin off in March.
The company also plans to cut costs by spending $400 million less on capital equipment by the end of this fiscal year.
Lucent said it secured $4.5 billion in 364-day credit from J.P. Morgan Chase & Co. and Citigroup Inc.'s Salomon Smith Barney unit.
(A replay of Lucent's conference call is available at http://www.lucent.com/investor/conference/webcast through Jan. 31.)
-- kevin (firstname.lastname@example.org), January 24, 2001