Friday said it would lay off 10,000 staffers and take its quarterly earnings-per-share (EPS) breakeven revenue level to $2.5 billion. The telecommunications equipment maker had previously set a target range of $2.5 to $3 billion.
The Murray Hill, N.J. company, which will see its staff paired from 45,000 to 35,000 when cuts are completed by the end of fiscal 2003, will also record a charge to equity of about $3 billion due to a decline in pension assets, attributed to declines in the equity markets.
The company said it still expects a 20 to 25 percent sequential decline in fourth-quarter revenue, compared with the third quarter's revenue of $2.95 billion.
Lucent also restructured its debt position to head off defaulting on loan agreements by notifying lenders that it will re-purchase real estate properties for some $100 million under existing lease agreements. These facilities will be sold as part of the restructuring efforts. To that end, the firm also cancelled its $1.5 billion credit facility and its $500 million accounts receivable (AR) securitization vehicle in order to avoid an anticipated default.
Lucent Technologies Chief Executive Officer Patricia Russo said the concern intends to return to profitability in 2003, pledging to "play to our core strengths in optical, circuit and packet switching, mobility and network operations software, and increase our focus on services."
Lucent will provide further details on these restructuring actions when it airs earnings on Oct. 23.
Closer to Lucent's home, Canada's Nortel Networks laid off 7,000 staffers in August for similar belt-tightening reasons. However, the rival did come forth Friday to declare that it would meet revised expected revenue expectations of $2.36 billion in the third quarter.
The Toronto-based equipment maker said its cash performance continues to "be strong" and that it's "in the process of positioning itself around its four key businesses" to set its break-even point at quarterly revenue of below $2.4 billion. Nortel expects this break-even model to be in place by the second quarter of 2003. Nortel plans to release its financial results for the third quarter of 2002 on October 17, 2002.
Lest anyone think Lucent and Nortel are alone in their telecommunications equipment woes, they aren't. French competitor Alcatel laid off a sizeable 20,000 from its workforce in September.
At the time, Yankee Group analyst Mark Bieberich told internetnews.com that 2003 looks like it will be a break-even year in the industry. The analyst said he expects conditions to improve in mid-2004, noting that the slew of major equipment purchases like those made in 1999 won't see light of day for another 18 months or so. Bieberich said Cisco and Alcatel enjoy solid relationships with their customers and are well positioned in their core businesses.