Lucent Starts Cleaning Up
After a series of financial debacles, Lucent Technologies Inc. (NYSE: LU) is trying to get a handle on its books, announcing a broad cost-cutting effort as it restates results following a company audit.
Lucent officials announced they would be adjusting down their Q4 revenue $679 million and cutting costs by $1 billion in fiscal 2001, in part by trimming the work force.
The earnings adjustment comes from the conclusion of an auditors' report originally announced on November 21, citing problems with Lucent’s accounting procedures in handling revenue recognition (see Lucent Shares Hammered by $125M Goof). As a result of the report, Q4 revenue will be revised down to $8.7 billion, and pro forma earnings will be 10 cents a share. These numbers are lower than the previously announced $9.4 billion in revenues and pro forma earnings of 18 cents per share. For fiscal year 2000, the adjusted total revenues are $33.6 billion in revenue and earnings of 93 cents per share.
In a conference call this morning, Lucent’s CEO Henry Schacht stated that things will get worse before they get better; he is expecting Q1 losses of 25 to 30 cents a share and sales 25 to 30 percent lower than Q4. He expects improvements to come by Q3 of 2001 and that Lucent will be “growing at, or better than, the market rate by fiscal 2002.”
Schacht reiterated a list of factors that he says led to the company's derailment. These include an obsession with short-term revenue growth -- which resulted in a series of deals made by sales folk that ultimately resulted in revenue errors like the $125 million reported last month. Also on the blacklist was a misguided attempt to carve Lucent into too many divisions, which Schacht admits led to a lack of focus and duplication of effort in a number of areas. He also cited the company's inability to manage its growth, and he acknowledged the damage done by failing to add OC192 capabilities to Lucent products early enough to stay competitive.
But Schacht stressed his positive outlook for the future. "Our aim today is to lay out the bad news and put it behind us," he said. His discussions with customers, he said, indicate that “Lucent is basically a sound company. We have identified the problems, and they are fixable.”
In addition to trimming the workforce, he said the management team intends to consolidate Lucent's offices and manufacturing facilities and prune its product lines. Also being revamped will be Lucent's financing policy -- up to now, one of the most generous in the industry (see Vendor Financing).
Lucent’s stock price was down more than 8 percent today, trading at $14.19.
-- Matt Malina, research associate, Light Reading http://www.lightreading.com