Lucent Technologies Inc's Henry Schacht, seven months into his second run as chief executive at the money-losing maker of phone equipment, says he has a plan to turn the company around.
Investors have their doubts. Lucent's stock has plunged 57 percent since Schacht's return. With demand for telecommunications gear fading and the company still working to trim annual costs by US$2 billion and return to profitability, many shareholders believe a sale to France's Alcatel SA is Lucent's best option.
``If this business stays tough in 2002, they don't have a lot of levers to pull,'' said Steve Mygrant, a money manager with Fifth Third Bancorp, which owns Lucent shares.
Lucent is shedding 16,000 jobs, selling factories and businesses, and eliminating products. While the 66-year-old Schacht said the Murray Hill, New Jersey-based company has taken ``a good first step'' toward stemming losses, he declined to forecast when the company will be profitable again. ``We're still losing money, and we still [have expenses outpacing revenue],'' said Schacht, sitting in his sparsely decorated office earlier this month. ``Both of these have to be fixed.'' Lucent, the biggest US supplier of phone equipment, reported a US$3.69 billion loss during its fiscal second quarter, which ended March 31.
``I don't know if it's worse than at any time, but it's very bad now,'' said Walter Casey, an analyst with Banc One Investment Advisors, which owns Lucent shares.
A sale to Alcatel, Europe's fourth-biggest maker of phone gear, may speed the recovery, investors said. The combination would reduce Lucent's dependence on US telecommunications companies, which are scaling back spending amid slack demand for phone and data services, while generating billions of dollars in cost savings, they said.
Alcatel is in the final stages of talks to buy Lucent for at or near its market value, the New York Times reported Friday.
Alcatel spokesman Klaus Wustrack and Lucent spokeswoman Mary Lou Ambrus declined to comment. Lucent's market value slid to US$32 billion Friday, down more than US$200 billion from its December 1999 high.
Schacht was Lucent's chief executive from October 1995 to October 1997. The company turned to its former CEO three years later after the board fired his successor, Rich McGinn, amid mounting pressure from investors. Lucent's stock price had dropped 68 percent from Jan. 1, 2000, to McGinn's Oct. 23 ousting.
Upon his return, Schacht pledged to shift Lucent's focus back to selling telecommunications equipment, software and services to large phone companies. Under McGinn, Lucent turned its attention to smaller, emerging carriers, Schacht said. The strategy backfired when those companies couldn't generate enough sales or secure financing needed to build or expand their networks.
Schacht, who earned a bach-elor's degree from Yale University and an MBA from Harvard, was chief executive at Cummins Engine Co, a Columbus, Indiana-based maker of diesel motors, for 22 years. In 1995, AT&T Corp lured him out of retirement to steer the equipment unit of the No1 US long-distance phone company through its spinoff.
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