Lucent Technologies Inc will cut as many as 20,000 more jobs, bringing the total to almost half the workforce, and take a charge of as much as US$9 billion as its third-quarter loss widened and sales fell. The company's shares fell 19 percent.
The biggest US maker of telephone equipment eliminated its dividend and may delay the spin off of semiconductor unit Agere Systems Inc for as much as six months. Lucent, which had planned to complete the separation by Sept. 30, instead may sell more shares in the business.
Lucent Chief Executive Henry Schacht is cutting annual expenses by US$4 billion, double earlier goals, as the company tries to conserve cash and return to profitability next year. Lucent and rival Nortel Networks Corp have too many workers, too much capacity and aging inventory because phone-equipment sales have plunged.
"They don't have a choice in what they're doing," said Rashad Barajakly, analyst at Williams Capital Group, who has a "hold" rating on Lucent shares. "They have to cut the cost structure." The shares of Murray Hill, New Jersey-based Lucent fell US$1.47 to US$6.43. They've plunged 86 percent in the past year, erasing more than US$130 billion in market value. Agere, which first sold shares to the public in March at US$6 each, fell US$0.90 to US$6.10.
Lucent's 7.215 percent bonds due in 2006 were bid at US$0.81 on the dollar, down from US$0.83 yesterday, traders said.
Standard & Poor's Corp said it was considering downgrading Lucent's debt. Both S&P and Moody's Investors Service lowered the company's rating to junk status last month.
In May, Lucent and France's Alcatel SA ended merger talks after they couldn't agree on management of the combined company. A sale or merger with Alcatel, Europe's fourth-biggest maker of phone gear, may have aided Lucent's recovery by reducing its dependence on US telecommunications companies and generating billions of dollars in cost savings, investors said. Schacht last month said Lucent and Alcatel wouldn't rekindle discussions.
Lucent had planned to shed 29,500 jobs through firings, early retirement, and the sales of factories and its optical-fiber business. The company will eliminate as many as 49,500 positions.
Lucent also has fired 5,500 contract employees since January.
Lucent also said it had canceled its dividend, saving US$68 million a quarter.
Furukawa Electric Co, a maker of lasers for communications networks, and Corning Inc. said they will buy Lucent's optical fiber and cable business for US$2.75 billion. Lucent also agreed to sell some inventory and property to Toronto-based Celestica Inc for US$550 million to US$650 million in cash. The company will sell or lease plants at Oklahoma City and Columbus, Ohio, to Celestica over the next few months.
"People are now seeing that we have the liquidity, and we've now announced we'll be profitable and cash-positive next year," Schacht said in an interview. "The issue of our ability to sustain ourselves has been answered." Lucent's third-quarter loss widened to US$3.25 billion, or US$0.95 a share, from US$301 million, or US$0.09, a year earlier. Revenue fell to US$5.82 billion from US$7.41 billion.
"They're giving away their products," said Steve Mygrant, an analyst with Fifth Third Bancorp.
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