Lucent Loses $7.9B, Plans Layoffs

MURRAY HILL, N.J. -- Lucent Technologies (NYSE: LU) today reported results for the third fiscal quarter of 2002. The company recorded pro forma revenues of $2.95 billion for the third fiscal quarter of 2002, a sequential decline of approximately 16 percent from the $3.52 billion in revenues that Lucent recorded in the second fiscal quarter of 2002. The company recorded $5.37 billion in pro forma revenues in the year-ago quarter. The pro forma loss per share from continuing operations was a loss of $1.86, which includes a non-cash charge of $1.70 per share to increase the valuation allowance on deferred tax assets. Without this charge, the pro forma loss per share from continuing operations would have been 16 cents versus a loss of 20 cents recorded in the second fiscal quarter, which included a six-cent tax charge. The company recorded a pro forma loss of 39 cents per share in the year-ago quarter. "The market continues to be very challenging. Capital spending constraints have intensified and remained in place much longer than anyone would have predicted," said Lucent's Chief Executive Officer, Patricia Russo. "Despite this, we are pleased to have generated a sequential improvement in our gross margin and positive operating cash flow. And while our bottom line was negatively impacted by a non-cash tax charge we recorded this quarter, we continue to see improvements in the operating fundamentals of our business. This speaks to the effectiveness of our restructuring efforts." On an as-reported basis, revenue for the third fiscal quarter of 2002 declined 50 percent to $2.95 billion compared with $5.89 billion in the year-ago quarter. The loss from continuing operations for the third fiscal quarter of 2002 was $7.84 billion, or $2.30 per basic and diluted share, compared with a loss of $1.88 billion, or 55 cents per basic and diluted share recorded in the year-ago quarter. On an as-reported basis, the net loss for the third fiscal quarter of 2002 was $7.91 billion, or $2.31 per basic and diluted share, compared with a net loss of $3.24 billion or 95 cents per basic and diluted share recorded in the year-ago quarter. The net loss in the current quarter includes a loss of $27 million related to discontinued operations. The net loss in the year-ago quarter includes a loss from discontinued operations of $1.36 billion or 40 cents per basic and diluted share. Due to continuing market declines, the company has committed to further restructuring actions that have resulted in an additional business restructuring charge of $808 million, which was recorded in the third fiscal quarter. Of the total charge, $335 million is expected to be cash. This is expected to result in approximately $700 million in annual savings. This charge includes plans to further reduce headcount by approximately 7,000, the majority of which is expected to be completed by Dec. 31, 2002. As of June 30, 2002, the company had 53,000 employees. These additional restructuring actions will result in EPS breakeven revenue of $3.5 billion with a gross margin level in the low 30s. Lucent is actively developing plans to further reduce its EPS breakeven revenue to below $3.5 billion during fiscal 2003. This will involve further actions and an additional restructuring charge, which likely will be recorded in the fourth fiscal quarter of 2002. Lucent Technologies Inc.