Optical/IP Networks

Lucent Loses $1 Billion, Plans Big Layoff

For the first quarter of 2001, Lucent Technologies Inc. (NYSE: LU) has announced a $1.02 billion loss and plans to lay off 10,000 employees (see Lucent Tightens Belt).

The company this morning announced revenues of $5.84 billion, down 26 percent from the same quarter a year ago. It posted a $1.02 billion loss or 30 cents a share, compared to earnings of $1.08 billion or 33 cents a share in the same quarter last year.

Even its optical networking products didn't help Lucent much: Optical sales were down 26 percent sequentially, the company said. But CEO Henry Schacht was optimistic on optical in a conference call on the earnings this morning. “We will see improved results sequentially [for optical networking] from here on in,” he said.

Schacht told analysts that its ultra-high-capacity DWDM system, the WaveStar OLS 1.6T has been well received. Lucent last week signed a three-year, $100 million deal with Time Warner Telecom Inc. (NYSE: TWTC) (see Lucent Signs $100M Time Warner Deal).

Schacht also said trials of its Lambda router at Global Crossing Ltd. (NYSE: GX) were "so far so good."

On the downside, the company had no comment on a possible optical win with WorldCom Inc. (Nasdaq: WCOM) reported by the Wall Street Journal. And Schacht pleaded "no comment" when asked about Lucent's elusive OC192 products, the lack of which analysts have repeatedly cited as a mark against the company.

Regarding Lucent's general financial picture, Schacht reiterated his December announcement of plans for a company turnaround (see Lucent Starts Cleaning Up): “The company is strong and has a lot of talent. We are taking the appropriate steps to achieve our goal of performing at, or better than, the market level by the end of 2002.”

As part of its restructuring, the company outlined a seven-point plan to bring the company back to profitability. Some of the highlights (or lowlights) of the plan were:

  • Layoff 10,000 employees Lucent plans to lay off 10,000 workers between February 15 and early March. In addition, Lucent will shed about 16,500 with its Agere Systems spinoff. And the company will trim another 6,000 workers by outsourcing some of its manufacturing. This will bring Lucent's total workforce down to 90,000 from 123,000.

  • Restructuring charge of $1.6 billion To pay for the layoffs, facility consolidations, and the elimination of some product lines, the company will take a $1.6 billion charge in the second quarter.

  • Outsource manufacturing Lucent plans to sell two large manufacturing facilities in Columbus, Ohio, and one in Oklahoma City. It then plans to outsource the manufacturing and assembly performed at those plants.

  • Reduce operating expenses by $2 billion This is $1 billion more than anticipated in the December conference call. The company plans to hire an internal manager and a consulting company to oversee the process.

  • Eliminate $400 million in capital spending The company did not specify where these cuts would occur. However, it did indicate it would discontinue some product lines.

  • Secure a $4.5 billion line of credit To help pay for things in this restructuring phase, the company has secured a $4.5 billion line of credit from J.P. Morgan & Co. (Nasdaq: JPM) and Salomon Smith Barney.

Schacht acknowledged Lucent is in for an uphill climb, and he said it will take time for the layoffs and other cost-cutting measures to take effect. “While sales will improve in the second quarter, the impact on the bottom line, from the cost reductions, won’t be felt until the third quarter,” Schacht said.

Lucent's also under pressure to reduce costs it didn't cite in this morning's call. The New York Times reports today that Lucent is in negotiations to sell an exclusive golf club for which ex-CEO Rich McGinn doled out $40 million between 1998 and his dismissal from Lucent in October. The 36-hole Hamilton Farm Golf Club, located in posh Peapack-Gladstone, N.J., included a helipad, a 20,000-square foot guest home, a wine cellar and tasting room, and a full-time concierge, the Times says.

-- Matt Malina, research associate, and Mary Jander, senior editor, Light Reading http://www.lightreading.com

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2cWorth 12/4/2012 | 8:59:33 PM
re: Lucent Loses $1 Billion, Plans Big Layoff Schacht also said trials of its Lambda router at Global Crossing Ltd. (NYSE: GX - message board) were "so far so good."

Quite a modest statement for such a promising new technology. I would guess that " not as well as we had planned" is more accurate
kanthi 12/4/2012 | 8:59:32 PM
re: Lucent Loses $1 Billion, Plans Big Layoff Well said my friend! Hatt's off to you.

Why lucent employees are such a band wagon
of idiots? I worked there as a consultant
for 3 months. Believe me, they are in a
totally different world. Here is a description
of their daily schedule.

They come at 10am to office. They check their
stock option worth, datek stocks worth, E-trade
options worth. It will be 11am by that time.
Then they check their lucent mail, hotmail, yahoo
local news papers, cnn, nba, nfl for the info
of their interest. Then comes the lunch time.
They go for lunch around noon. They go to cafe
and wait for their friends to come and join.
This will happen in just 30 minutes. Soon after
they start eating lunch, chatting about stocks
manager, etc.... ByTheTime they finish the
lunch, it will be 2pm. They come back to their
cubes, check their stocks, option worth, emails.
It will be around 3pm by now. Then they make
some calls to repair their kitchen, fan, AC
and then call home to see if everything is OK.
Then around 3:30pm, they start going towards
the jym center located within the company.
They go there, change their dress, have a nice
workout and come back to their offices, just
to check email, stock, sell orders status etc...
They say goodnight to each other and leave
around 5:15pm to home.

That's all folks. This is their daily schedule.
Who says, lucent is making progress? It is a
dead company.

question7 12/4/2012 | 8:59:31 PM
re: Lucent Loses $1 Billion, Plans Big Layoff There were some hard-working Lucent employees. But the Lucent culture makes it hard for them to stay.

For example, one of the major performance criteria in ONG is VISIBILITY. It was the employee's responsibility to advertise his/her achievement to ALL managers in the department. In the performance review, he/she was usually blamed for not writing more emails to OTHER managers!

If you want to work for ONG, you should avoid working hard. It is useless. Visibility is the key. If you are very visible and elected as a hero, ONG will make you even more heroic by sending you to an island for a whole week vacation, WHILE YOUR COWORKERS ARE WORKING OVERTIME IN THE LAB.

trinity 12/4/2012 | 8:59:31 PM
re: Lucent Loses $1 Billion, Plans Big Layoff Kanthi,
You should not let your 3 month's worth of negative perception stereo-type the entire Lucent population. Similiar stories have been told about consultants at Lucent and AT&T who come in and work on their side businesses.

The fact is, there are many hard working people at Lucent who are dedicated to their work and to the company.

Maybe the group of people you are describing were Lucent consultants?
voice of sanity 12/4/2012 | 8:59:30 PM
re: Lucent Loses $1 Billion, Plans Big Layoff what is ONG?
laserfocus 12/4/2012 | 8:59:29 PM
re: Lucent Loses $1 Billion, Plans Big Layoff optical networking group
manoflalambda 12/4/2012 | 8:59:27 PM
re: Lucent Loses $1 Billion, Plans Big Layoff Hi all,

"One Who Cares [sic]" lets see it all hang out. I'd love to see your take on all of the ONG GMs from Austin to whomever. Who will succeed? WHo will fail? Which GM (aka Directors) appointed cronies as Directors (aka Department Heads)...

As for performance, VISIBILITY, yes, but GOOD VISIBILITY. If you are visible for missing dates, or visibly doing nothing, your aren't going anywhere. Lateral support is important but you aren't going anywhere if you don't have your manager's support and she/he sees the results.

Regarding work schedules, I guess he/she missed all the people working 7-7 to get things done. As for quiting "in disgust" more like they went to one of the many startups in the country, "disgusted" by the cash and options offered.

Man of la Lambda
anotherlu 12/4/2012 | 8:59:27 PM
re: Lucent Loses $1 Billion, Plans Big Layoff kanthi
gee .....and how much "consulting" work did you get done while you were following these people around?
Yes - there are always a few "dead wood" types - in every company - but not everyone as you describe.
by the way - what location did you "consult" at?
The Spectre 12/4/2012 | 8:59:27 PM
re: Lucent Loses $1 Billion, Plans Big Layoff How do you figure? If you assume that optical networking is the only thing going on in the world. But with so much competition in that space, perhaps fiber is most important. And considering that their fiber division is making money, its the most important right now.
sandroc 12/4/2012 | 8:59:26 PM
re: Lucent Loses $1 Billion, Plans Big Layoff So it should get you really tickled to know your hero Jeung Kim is taking 100 of his ONG employees to the Atlantis hotel in the Bahamas for a 3 day junket next week.

Going mid week too to make sure they miss as much work as possible. Guess things are all squared away now with product and Debby has met her cost control's she spoke of today.
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