jefferson, I believe that your timeline is accurate. I had heard the 23rd, but that seems like a strange date. Thanks for the confirmation of what I had read and heard as well. tp
btw, this was out today as well... May 14:00 By Johnathan Burns NEW YORK (Dow Jones)--After years of bulking up, world-leading
telephone-equipment maker Lucent Technologies Inc. (LU) is shedding parts and
streamlining operations in an effort to recapture the affection of a fickle Wall
Street.
The move, which had been tossed around within the company for more than a
year, became a necessity after Lucent reported worse-than-expected first-quarter
results in January.
Since then, the Murray Hill, N.J., company has announced that it will spin off
two of its less-profitable businesses, outsource a major amount of its
manufacturing operations and sell its industry-leading power-systems division.
The moves would mean the slimmed-down Lucent's work force would be reduced by as
much as 45,000 employees. The company is also getting rid of units with combined
annual revenue of about $9 billion.
Still, Lucent is a big ship. Turning it will take time. Outsourcing some
manufacturing could take at least a year or two.
But the restructuring is necessary if the behemoth is to achieve the 20% plus
revenue growth investors want to see.
And it is equally important for putting the sparkle back into a stock that has
dropped by more than 30% since the beginning of the year.
"I think it's a good idea to pare down the company," said David Toung,
telecommunications-equipment analyst with Argus Research. "I think Lucent's
problem is it's a big company with a big bureaucracy."
Already, there are signs the company is regaining its stride.
Analysts and company insiders say morale has increased within Lucent, even as
the axe has continued cleaving.
"There seems to be a lot more enthusiasm within the company these days," said
Jim Jungjohann, telecommunications-equipment analyst with CIBC World Markets.
Lucent has also unveiled new optical-fiber products and announced accompanying
field trials.
"I've seen so many companies go through this," said Ed Shill, chief investment
officer at Rochester, New York-based QCI Asset Management. "Nine times out of
10, it is a very good thing."
Jungjohann said Lucent will continue to make restructuring decisions,
including new strategic partnerships.
"What they're trying to do is put a new face on the company," he said. "These
moves are likely to bear fruit in the long term."
Chief Executive Rich McGinn's quest is to restructure the company around a
core of business units that address the hot optical-networking, Internet and
wireless infrastructure markets.
It is not a move without precedent.
Corning Inc. (GLW) engineered a similar restructuring in the late 1990s,
shedding its glassware products and other operations to focus on its fiber-optic
business.
"It's like what Corning went through three years ago," said Shill. "Lucent is
going to peel away the layers of the onion. There is a huge (fiber-optics)
player embedded in the other layers. I think it's going to be a huge positive
for the company."
Optical networking is the catch-all description for products built for the
fiber-optic communications market. The glass gossamer within a fiber-optic cable
allows light to move across the world at lightning-fast speeds. But the light,
which carries video, data, Internet and voice traffic, has to be re-routed into
cities, across regions and under oceans.
That's where optical networking comes in.
Demand for the gear is expected to reach $23 billion in 2003, up from $5
billion last year.
Old-Economy Stalwarts Embrace New Economy
Corning is one of the few companies in the optical-fiber market as old as
Lucent.
At almost 150 years old, Corning has long been known for making indestructible
glass cookware that could seemingly survive any heat short of a nuclear blast.
But the company sold those operations in 1998 and began focusing on optical
fiber.
Corning is now the world's leader in optical-fiber production. Since reaching
a share price low of $23.50 in 1998 when the Asian economic crisis squashed
demand for fiber optics, Corning's stock has risen roughly 800% to its Friday
closing price of $189 1/16. At midday Monday, it was at 184 3/4, down 4 5/16 or
2.3%, on the New York Stock Exchange.
Lucent, which leads even Corning in the production of high-end optical fiber,
can trace its roots back 128 years to Western Electric. While the company has
had a host of legacy products - producing phones, cellular phones and answering
machines, it at least has stayed out of the kitchen.
Analysts believe its transition can be relatively smooth, as refocusing on
certain segments of communications will be easier than pulling out of a consumer
market.
But Lucent's restructuring is not without risks.
While the company focuses on high-growth areas, it is getting rid of some
segments that provide steady revenue. The power systems business, for instance,
led the industry in worldwide sales and accounted for $1.2 billion in revenue,
including sales within the company. The business is also growing at 20%, Lucent
says, which is twice the industry average.
However, the power-systems unit's $100 million in operating income in 1999 - a
44% improvement over the year before - didn't save it from the auction block.
Lucent will forego the prospects of growth in its power-systems business so it
can focus research and development spending on fiber optics and wireless
infrastructure.
Industry observers and Lucent management believe the company will benefit by
keeping its eye on its communications businesses.
McGinn said the company's disappointing first quarter was partially the result
of Lucent underestimating the dramatic shift by telecommunications-service
providers to high-capacity fiber-optic gear.
That quarter was the first the company did not exceed expectations since being
spun off from AT&T Corp. (T) in 1996.
Slip Opened Door For Competitors
It was Lucent's slip that allowed Canadian rivalNortel Networks Corp. (NT) to
capture market share - and a heap of investor attention - in the fiber-optics
sector.
Lucent, which has often been too big to be nimble, will have to move quickly
to make up for lost time.
Even the products the company makes won't have much staying power. Technology
moves quickly in the fiber-optic market.
"The folks I talk to in (fiber-optic gear) say the average life of a (product
run) is less than 12 months," Shill said.
He does not expect Lucent's stock to mimic Corning's climb following that
company's restructuring.
But Shill does expect Lucent's shares to begin climbing, most likely beginning
in the second half of the year.
"I'd be pretty surprised if they were not trading north of 100 within 18
months," he said.
Shill said he sees relative little downside to the stock at current levels. He
figures Lucent's stock is at or near its bottom. The stock closed Friday at 58
5/8 and was at 58 1/16, down 9/16 or 1%, at midday Monday.
"If we're wrong, we just have dead money," he said.
-Johnathan Burns; Dow Jones Newswires; 201-938-2020
(END) DOW JONES NEWS 05-08-00
02:00 PM
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