Loss widens, sales drop, 20,000 more workers face the axe

<font size=5>Lucent hemorrhage worsens</font>

July 24, 2001: 11:58 a.m. ET

NEW YORK (CNNfn) - <font color="#FF0000">Lucent Technologies Tuesday reported a wider-than-expected loss for its fiscal third quarter and the troubled telecom equipment maker said it will cut up to 20,000 more jobs and take a huge restructuring charge</font>.

The company, whose stock is one of the most widely held in the United States, also agreed to sell some of its key assets as it struggles to cut debt and stem losses, and said it may delay the spinoff of its Agere Systems unit, which makes communications chips, for six months.

But the price it will get for its optical fiber unit, its key business that was for sale, is below what Lucent originally sought and below what some Wall Street analysts said was necessary to help the company solve its financial problems.

Lucent Technologies' headquarters.

The fiber-optic unit fetched $2.75 billion from Furukawa Electric Co. of Japan and Corning Inc.

<font color="#FF0000">Lucent also eliminated its 8 cent a share dividend</font>, a move that will save it $68 million a quarter, and announced it would cut capital spending by $750 million annually and take a charge of between $7 billion to $9 billion for its latest restructuring moves.

<font color="#FF0000">The news sent already depressed shares of Lucent tumbling at mid-session</font>.

The Murray Hill, N.J.-based company said <font color="#FF0000">it lost $1.2 billion, or 35 cents a share, from continuing operations excluding special items during its third quarter ended June 30</font>. <font color="#FF0000">Analysts surveyed by earnings tracker First Call were looking for a 21-cent-a-share loss</font>. <font color="#FF0000">The company earned $776 million, or 23 cents a share, from continuing operations a year earlier</font>.

Sales from continuing operations fell to $5.8 billion, well below the First Call forecast of $6.2 billion and down from $7.4 billion a year earlier. Revenue even fell from the $5.9 billion level reached in the second quarter. The company had said as recently as June 5 it was confident that third-quarter revenue would top second-quarter levels.

The company said industry uncertainty no longer allowed it to forecast an improvement in revenue in its fourth quarter from the second and third quarters. First Call's forecast had called for revenue to rise to about $6.6 billion in the fourth quarter, which still would have left it well below year-ago sales of $8.7 billion.

"For us to go ahead and try to predict top line, we're just not prepared to go there," Lucent CEO Henry Schacht said in a conference call with analysts. He did say he expects the company to be able to cut its loss from continuing operations in the fourth quarter from third-quarter levels, but would not relate how that improvement would compare to Wall Street forecasts of a loss of 22 cents in the period.

<font color="#FF0000">In an effort to stem losses, Lucent said it would slash 15,000 to 20,000 more jobs after it set plans to cut 19,000 jobs earlier this year. Management ranks will be cut by up to 30 percent, Schacht said</font>.

The company had about 95,000 employees at the end of the most recent quarter, though about 8,500 of those are due to leave after accepting early retirement. In addition, some 6,000 employees in the fiber optic unit will leave the company as part of the sale.

The company said this will cut costs by $2 billion annually. It also said it plans to return to profitability and positive cash flow during its next fiscal year, which ends Sept. 30, 2002.

Schacht said during the call that the company will ask lenders to change some terms of its outstanding debt in light of the expected restructuring charge."Let me be clear. We're not asking for more money. We're asking for the flexibility we need to accomplish the restructuring," he said.

<font color="#FF0000">Including all special charges and items the company reported a net loss of $3.2 billion, or 95 cents a share, in the latest quarter, more than 10 times the net loss of $301 million, or 9 cents a share, a year earlier</font>.

The company acknowledged the difficulties in selling the fiber-optic unit in a market that has seen telecommunication companies cutting their own capital spending. One analyst had said it was crucial that Lucent get at least $3 billion for its fiber optic unit.

<font color="#FF0000">"We're pleased to have received the best value for this business under difficult market conditions,"</font> Bill O'Shea, Lucent executive vice president, said in a statement.

Lucent will get $2.53 billion for the major portion of the fiber-optic unit, while Corning will pay $225 million for Lucent's two joint ventures in China.

In addition, the company sold plants in Oklahoma City and Columbus, Ohio, for between $550 million and $650 million to Celestica, a Canadian electronics manufacturer. The final sales price will be determined by an inventory of assets, primarily inventory, at the plant at the time of the deal's closing. That sales price was also below some earlier estimates that the plants could bring in between $600 million and $900 million.

As part of the plant sale, Lucent signed a five-year contract valued at $10 billion to buy switching, access and wireless networking systems products from Celestica [/i]

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