Lucent Loses Billions, Refocuses
Chairman and CEO Henry Schacht said the company was restructuring by jettisoning slow-growth product lines and refocusing its sales force on selling to larger telecommunications carriers, rather than to the startup CLECs (competitive local exchange carriers) that are on more delicate financial ground.
"We made progress by doing what we said we would do," said Schacht. "We've made improvement in several segmaents. We made sequential improvements. These were driven by business with large carriers."
Results for the second fiscal quarter of 2001 show revenues increased to $5.6 billion, a sequential increase of 36 percent over the first quarter. The company reported a pro forma loss of $1.3 billion, or 37 cents per share, a dramatic fall-off from last year's profit of 16 cents during the same period, but a 5 percent improvement over the 39 cent loss reported in the first quarter of 2001. These pro forma numbers in the second quarter excluded a $2.7 billion charge for restructuring the company, including the spinoff of Agere Systems (NYSE: AGR). Including this charge, the company lost $3.4 billion during the quarter.
There was both good and bad news in these results. For one, the enormous losses gave little indication of when and if Lucent can return to profitability. Company officials did not give many details on new customer wins or how the progress broke down among specific product groups.
In addition, the $2.7 billion restructuring charge was a glaring red mark on the company's quarterly report.
Lucent CFO Deborah Hopkins described the procedure as a precise reduction in unprofitable product lines: "It's a surgical approach to pruning our product portfolio. That's how we got to the $2.7 billion."
On the bright side, some analysts were impressed with the reduction in accounts receivables.
"With a sequential increase in revenues of more than $1.5 billion, a sequential decline in accounts receivables of almost $500 million was outstanding," wrote Lehman Brothers analyst Steve Levy in a research note before the conference call. "If there was no substantial factoring of receivables this result is quite impressive and could be a sign of positive things to come."
Hopkins said the reduction in receivables came as Lucent stepped up collection efforts. "Receivables were down $500 million. This came from going back to basics and collection efficiency."
But Levy expressed reservations about the company's progress in reducing costs and conserving cash.
"Progress in restructuring efforts were so-so, in our opinion," he writes. "Expense reductions to date have been modest, and headcount reductions at the end of the second quarter were only 2000 of the announced 10,000," wrote Steve Levy. "We believe that Lucent needs to increase its headcount reduction efforts and move faster with all its restructuring projects."
-- R. Scott Raynovich, Executive Editor, Light Reading http://www.lightreading.com