Lucent: 20,000 staff to walk the plank

NEWS Lucent's furrowed brow became even more wrinkled today as it reported mounting losses, and gave no clear indication of where its future revenues would come from. But it did explain how it was planning to reduce its cost base - which, while important, hasn't exactly got analysts overly excited about the company's prospects. Henry Schact, Lucent's chairman and CEO, told shareholders not to expect a dividend for the quarter as he implemented the next phase in his grand plan to get the telecoms equipment vendor back on track. By the time his seven-point plan is completed, Schact said Lucent will be a "smaller, leaner, less cost-incurring company" focusing on optical data networking services. He added: "We can reduce operations by up to $2bn through reducing the headcount, improving product rationalisation and decreasing discretionary spending. This will improve the performance of the business and, over time, our margins." The company lost $3.25bn in its latest quarter. Up to 20,000 redundancies are expected. Between 25 and 30 per cent of Lucent's senior executives can expect to fall victim to the job cull. This will result in a one-time charge next quarter of between $7-9bn. Other money raising schemes include leasing its manufacturing assets, selling off the optical fibre business and a closed property financing deal - yielding the company $2.75bn, $650m and $300m respectively. Lucent will lease its manufacturing assets in Columbus and Oklahoma City to Celestica, while Japan-based Furukawa will pick up the optical fibre business. Mark Blowers, senior research analyst at Butler Group, warned Lucent against adopting a short-term approach. "Lucent is in danger of selling off its assets and ending up with nothing to help it in the long term. This strategy might raise money in the short term but the company needs to focus on revenue from sales for the sake of future health," he said. Financial analysts criticised Lucent for failing to set estimates for Q4 or revenue predictions to indicate a return to positive cashflow. Bowers added: "The figures are lacking in creditability. It needs to be coming up with the figures if it wants us to believe that sometime in 2002 it will be profitable. Surely, the company has done its calculations and has an idea of what the revenue will be in order to be profitable?" However, Schact refused to be drawn, stating he was not prepared to offer guidance of that type.