Lucent Technologies has announced another 10,000 layoffs and several complex financial moves aimed at lowering its breakeven target to a level it can reach during 2003.
As a result of the moves, the company, which has been hit hard by the carrier spending slump, said it will record a significantly larger loss in the fourth quarter, due to restructuring-related charges and the decline in pension assets.
Lucent expects fourth-quarter revenue to come in at about 20% to 25% less than anticipated third-quarter revenue of $2.95 billion. But the pro forma loss per share is like to be $0.20 greater than the $0.45 it previously estimated.
We re-evaluated several balance sheet items, including inventory, said CFO Frank D’Amelio. The resulting charges will significantly increase the previously forecast pro forma loss. In addition, the company will record a $1 billion restructuring charge.
The company said the moves will reduce the amount of quarterly revenue it needs to break even to $2.5 billion. Previously, the company had said that its breakeven target was $2.5 billion to $3 billion of quarterly revenue.
Lucent said in a statement that it expects to have 35,000 employees at the end of 2003. That’s compared to a target of 45,000 at the end of this year, and down from a high of 155,000 two years ago.
Despite the market challenges, we intend to return to profitability in fiscal 2003 and we are taking more aggressive restructuring actions to bring our breakeven down even further, said Lucent CEO Patricia Russo.
Based on conversations with our customers, we are tightly focusing our investments on the nearest and clearest market opportunities, Russo added, apparently not confident in a near-term upturn in carrier spending habits.
In addition to the layoffs, the company announced that it has cancelled a $1.5 billion credit facility and a $500m accounts receivable securitization program in order to avoid an anticipated default on the financial covenants. Lucent had not drawn on either facility.
Lucent also announced a $3 billion fourth-quarter non-cash charge related to declines in the value of its management pension plan, related to the shrinkage in the equity markets. The firm also said it will exercise the rights to purchase real estate it currently leases, which it will then sell, in order to avoid defaulting on the agreements.