- The Washington Times - Saturday, October 12, 2002

TRENTON, N.J. (AP) Lucent Technologies Inc. said yesterday that it will cut its work force by another 10,000 and intensify restructuring because revenue in its latest quarter plunged and it expects a much bigger loss than forecast.

The latest round of job cuts at Lucent, a struggling telecommunications equipment maker, confirms rumors that have been circulating for weeks. It will leave the company with 35,000 workers, about 23 percent of its peak work force of 153,000 three years ago.

"Our intent is to really get the majority of the reductions done as quickly as possible," Lucent's chief financial officer, Frank D'Amelio, told analysts during a conference call. He said the 10,000 workers, from throughout the company, would be off the payroll by March.

Excluding one-time items, Murray Hill-based Lucent said it expects to lose as much as 65 cents per share in its fourth fiscal quarter, which ended Sept. 30. That equates to a loss of $2.2 billion the company's ninth straight quarterly loss. It had been expecting a loss of 45 cents a share, excluding one-time items.

The net loss will be at least $3.2 billion, including a $1 billion restructuring charge to cover severance pay, write-downs of inventory that isn't selling and other costs. Additional one-time charges are expected, so Lucent's 2002 net loss could top $12 billion.

The company plans to report its fourth-quarter earnings Oct. 23.

Lucent shares, which sold as high as $84 in 1999, fell 12 cents to close at 58 cents on the New York Stock Exchange.

Two ratings services downgraded Lucent. Standard & Poor's lowered its credit rating on Lucent to B-minus from B and said it would review its rating to determine whether it should be lowered further. Fitch Ratings downgraded Lucent senior unsecured debt to CCC-plus from B-minus, and convertible preferred stock and trust preferred securities to CC from CCC-minus.

Lucent said the job cuts and other restructuring moves are needed to lower its break-even point, where revenue covers expenses, so it can meet its target of returning to profitability by next summer.

"I think it's possible," said telecommunications analyst Steve Levy of Lehman Brothers. "This is the kind of aggressive move that I was hoping they would do."

Just a month ago, Lucent said it could break even with quarterly revenue of $2.5 billion to $3 billion; now it says it must cut costs to $2.5 billion or less.

"It feels like we're trying to fly a 747 through a storm and change the engines at the same time," said Lucent Chief Executive Patricia Russo.

Lucent and its rivals have been severely hurt by anemic demand for telecommunications gear as telephone and Internet service providers sharply cut back on spending after unprecedented growth during the late 1990s.

"The carriers are on what I term a hunger strike," said telecommunications equipment analyst Paul Sagawa of Sanford C. Bernstein & Co.

That's partly because federal regulators now require regional Bell operating companies to let competitors use their network at just over cost. That leaves telephone companies no incentive to expand or upgrade networks, which could threaten service quality soon, Mr. Sagawa said.

Lucent said sales for the just-ended quarter were down 20 percent to 25 percent from third-quarter sales of $2.95 billion.

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