Lucent Technologies Inc had a US$3.69 billion quarterly loss on larger-than-expected charges for eliminating product lines and jobs. Its chipmaking unit, Agere Systems Inc, will cut 2,000 positions.
Lucent said fiscal second-quarter sales fell 17 percent from the year-ago period, though they rose from the first quarter. The biggest US maker of phone equipment, which has posted losses in four straight quarters, plans to spin off Agere by September after selling shares in the unprofitable unit last month.
Beset by slumping sales of older phone equipment and beaten to the market for faster fiber-optic gear, Lucent is now trimming costs and focusing on fewer products. Its shares rose 11 percent after the company reported progress on its plan to slash expenses by US$2 billion annually and said it had repaid all of the commercial paper owed to Morgan Stanley Dean Witter & Co.
"This takes Lucent out of the emergency room and puts it into guarded and stable condition," said CIBC World Markets analyst Stephen Kamman, who rates Lucent "buy." "The company probably returns to health by the end of this year." Agere, which also makes optical components, is eliminating 11 percent of its workforce. The Allentown, Pennsylvania-based company employs about 18,500 people worldwide.
Lucent shares rose US$1.05 to US$10.25. They had tumbled 84 percent in the past year. Agere declined US$0.41, or 5.7 percent, to US$6.74.
"Lucent isn't going to disappear," said Peter Conrad, an analyst at Kopp Investment Advisors, which owns a small stake in Lucent. "Whether they are highly successful in their turnaround, or marginally successful, has yet to be determined. But Lucent is here to stay."
Lucent's loss in the period ended March 31 was US$3.69 billion, or US$1.08 a share, compared with net income of US$755 million, or US$0.23, a year ago. Sales slid to US$5.92 billion from US$7.15 billion.
Revenue increased 36 percent from the first quarter's US$4.35 billion, excluding Agere's results. Sales of the company's fiber- optic gear and phone networking switches had the greatest sequential improvement, Chief Financial Officer Deborah Hopkins said on a conference call.
The company attributed the increase to its renewed focus on winning more business from established telecommunications companies instead of pursuing orders from smaller, financially strapped carriers.
"Large service-providers are going to spend a lot of money," Chief Executive Henry Schacht said in a conference call.
"The money will be available for those who earn it, and we intend to be one of those that do that." Sales will rise "modestly" in the third quarter from the second, Lucent spokesman Bill Price said. The company also expects "greater sequential improvement" in its per-share loss in the third quarter, he said.
Lucent took a charge of US$2.7 billion related to its plan to shed 16,000 jobs, close plants and cancel some products. The total exceeded the US$1.2 billion to US$1.6 billion the company had estimated earlier this year because Lucent terminated more products than expected and wrote off inventory and other assets.
The Murray Hill, New Jersey-based company has repaid all of the commercial paper it owed to Morgan Stanley Dean Witter, Hopkins said. The securities firm, which managed Agere's IPO, had acquired the debt as part of an agreement to help fund Lucent while it prepared to sell shares in Agere.
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