Lucent Cuts Outlook, Replaces Chairman
Oct 23 9:13am ET
NEW YORK (Reuters) - Struggling No. 1 telecommunications equipment maker Lucent
Technologies Inc. on Monday ousted Chairman and Chief Executive Rich McGinn, replacing
him with former chairman Henry Schacht, and slashed its sales and profit outlook for the
first quarter of 2001.
``In a meeting this weekend, the board reviewed Lucent's recent performance and outlook
for the current quarter and determined that an immediate change in leadership was
necessary,'' the company said in a statement.
Rumors of McGinn's demise have swirled for months. Lucent (LU.N) has been working to
rebuild investor confidence, catch up to rivals in the booming optical networking industry,
and restructure operations. Although McGinn had said the company's problems were
fixable, investors and analysts had said a bold management shakeup was needed.
Murray Hill, N.J.-based Lucent also cut its first-quarter outlook, marking the fourth time this
year it lowered guidance. It now expects pro forma revenue from continuing operations to
decline about 7 percent in the first quarter, and pro forma earnings per share to break even.
Analysts had expected the company to earn 23 cents a share, compared with 33 cents a
share a year ago, according to research firm First Call/Thomson Financial. Lucent will
release its fourth-quarter results after the stock market closes on Monday.
Schacht, 66, returns to the role he held with Lucent from 1995 to 1997. He will work with
Lucent's senior leadership team to manage the company's day-to-day operations and is
initiating an executive search for a new chairman and chief executive officer.
``Our issues are ones of execution and focus, and they are fixable... I have seen Lucent's
people accomplish incredible feats before, and I know we are up to this challenge,'' Schacht
said.
Lucent said it also ended its previously announced search for a chief operating officer. The
company confirmed that it would move ahead with plans to spin off the microelectronics
business, which makes semiconductors and components, and sell its power systems
business.
Lucent's problems have been widespread. Lucent missed the industry's shift toward
high-speed fiber optic products and away from traditional telephone switch networks. When
it finally jumped on the optical boom, it already trailed rivals such as Canada's Nortel
Networks Corp. (NT.N)(NT.TO) and Cisco Systems Inc. (CSCO.O)
When Lucent tried to launch its own optical product line, it was unable to manufacture the
products fast enough to keep up with robust customer demand. It lost orders to rivals and
disappointed key customers, analysts said.
While Lucent had hoped to resolve its manufacturing and product development problems by
mid-year 2000, the woes lingered into the fourth quarter of 2000 and will hurt 2001.
Following the first-quarter shortfall in 2001, Lucent expects a sequential improvement in
results for the rest of the year. It did not provide additional details. This guidance does not
include a planned restructuring charge. Analysts have said Lucent needs to cut workers,
streamline its administrative functions, and speed its product development.
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