Reducing debt is a priority for Lucent, which faces the threat of being cut to junk status by Standard & Poor's. Lower ratings increase the amount a company pays on its debt. S&P rates Lucent's long-term debt "BBB-," a step from junk, and its commercial paper "A-3." Lucent secured US$4 billion in credit lines through a February agreement with banks. It borrowed another US$2.5 billion and passed the debt off to Agere as part of the unit's initial public offering. Lucent drew down US$500 million from its credit lines during the second quarter, Hopkins said.
The second-quarter loss "comfortably cleared" requirements outlined in Lucent's loan accords with banks, Hopkins said. Lucent agreed to limit losses in the nine months ending Sept. 30 to US$2.35 billion to avoid defaulting. It's allowed to take a maximum of US$4 billion in pretax restructuring charges.
Lucent also plans sell a business that makes fiber and cables used in telecommunications networks. The unit is expected to fetch about US$5 billion, analysts said.
Schacht said in an interview that the company had received initial bids for the business. It will be at least several weeks before an agreement is reached, he said.
The sale is an important cog in Lucent's plan to reduce debt, Kamman said.
"If it does not occur, then `Houston, we have a problem,"' he said.
Write-downs from certain investments, and bad debt from Winstar Communications Inc, a customer that recently filed for bankruptcy, widened the recent quarter's loss by US$510.1 million, or US$0.15, Lucent said.
Excluding discontinued operations, acquisition costs and one-time charges, Lucent would have lost US$751.9 million, or US$0.22, in the second quarter. Lucent said it reduced expenses by US$75 million during the period and trimmed capital spending US$100 million more than planned.
Agere said its loss in the quarter ended March 31 was US$148 million, or US$0.15 a share, compared with net income of US$65 million, or US$0.06 cents, in the year-earlier period. Sales rose to US$1.19 billion from US$1.07 billion.
"We're currently hearing from our customers that times aren't very good," Agere Chief Financial Officer Mark Greenquist said in an interview.
Agere said sales will fall 14 percent to 20 percent in the third quarter from the second. Lucent is Agere's biggest customer, accounting for 15 percent to 20 percent of the company's total sales, Greenquist said.
Most of the job cuts will take place at Agere's manufacturing facilities in Allentown, Breinigsville and Reading, Pennsylvania; Irwindale, California; and Orlando, Florida, the company said.
RSS