Lucent warns again as sales plunge again
Lucent Technologies Inc has continued to under-estimate the extent of the slump in spending on telecoms equipment and announced on Friday that it expects revenue for its fourth quarter to fall 20% to 25% below the previous three months to a range of $2.2bn to $2.36bn.
Given that analysts had been expecting a modest 5% sequential decline in revenue to $2.8bn, the severity of the problems facing the Murray Hill, New Jersey-based company are far worse than expected and are bound to produce another batch of huge job losses.
A workforce that stood at 106,000 in 2001 will be down to 45,000 by the end of this year and is likely to fall to around 30,000 in 2003 if it is to get costs matching the shrivelled level of revenue.
Lucent said that it was developing plans to cut its quarterly break-even level of revenue to $2.5bn to $3bn, though it is still engaged in a previous cost-cutting exercise to bring the figure down to $3.5bn.
With these additional restructuring actions, Lucent still targets a return to break-even by the end of the 2003 financial year. In the meantime, it continues bleeding cash and forecasts a fourth-quarter loss of $0.45 a share as a result of the revenue decline and a "significant customer financing default".
Despite the savage revenue decline, Lucent said it still expects to meet the covenants on its undrawn $1.5bn credit facility.
The news pushed its shares down another 11.5% to $1.46, valuing the company at just $5bn, and while the scale of the telecoms slump has hit all suppliers, Lucent is suffering worst than most.
Certainly the company has shown a degree of optimism which could not be justified given the financial state of its customers. When it reported its first-quarter figures in January, CFO Frank D'Amelio said: "We continue to believe that revenues in the first fiscal quarter of 2002 represented the low point for Lucent sales in the current market downturn.
Revenue in the first quarter was $3.5bn, 48% higher than the best the company now expects in the fourth quarter.