Large Lucent Layoff Looms
Chairman and CEO Henry Schacht announced to employees yesterday that more layoffs are coming and that they would hit all levels of the company. Several sources close to the company said the company is planning particularly heavy cuts at the corporate operations and executive levels, including firing as much as half of all corporate operations staff and senior executives. Overall, the sources expect the company to lay off an additional 10 percent of the workforce, which would amount to roughly 8,000 more jobs.
A Lucent spokesman said that Schacht did not give specific numbers in the employee broadcast on Thursday, but he did say the company would be laying off 25 to 30 percent of senior executives.
”It’s not surprising to me that there might be additional layoffs,” says Steve Levy, an analyst with Lehman Brothers. “They’re increasingly aggressive.” Levy points out that the pace of layoffs, which has included a voluntary retirement plan, has increased since the potential merger with Alcatel SA (NYSE: ALA; Paris: CGEP:PA) was called off (see Alcatel, Lucent Throw in the Towel).
So far, Lucent has announced 10,000 layoffs. In addition, 8,500 employees have accepted voluntary retirement packages. Lucent intends to complete the 10,000 layoffs by the end of the summer and any additional layoffs will be announced by the end of the third calendar-year quarter, or the end of September, according to the Lucent spokesman.
The layoffs are important in Lucent’s ongoing efforts to reduce expenses and slow down its enormous losses, which amounted to a $1.3 billion pro forma loss in the second quarter of 2001, not including $2.7 billion in special charges. The company is also under pressure to raise cash through the sale of assets such as its optical fiber business (see Lucent's $5 Billion Question).
”The wild card here is how well do they manage the balance sheet -- specifically, reducing working capital,” says Levy. "We don’t know the answer to that. But we don’t think they’re going to have a serious liquidity issue. Operating losses should come down this quarter." Lucent shares rose in midday trading on Friday, up 0.49 (7.14%) at 7.35.
— R. Scott Raynovich, Executive Editor, Light Reading