LUCENT Memo: 28 March, 2001
LUCENT TECHNOLOGIES
ACBU--INSTALLATION
From: LT Today
Sent: Wednesday, March 28, 2001 10:16 AM
Subject: A Message from Henry Schacht
A Message from Henry Schacht
Fellow employees:
Over the past several weeks, we've made a number of
significant changes in our company as we've set in motion
the seven-point restructuring plan we announced in January.
I wanted to bring you up to date on our progress in getting
Lucent back on track and put those changes in context,
because the recent downturn of the U.S. economy has put
added pressure on us to act with an even greater sense of
urgency.
First, I'm sure it is clear to all of us that Lucent
is rapidly becoming a very different business as we make
significant changes to our structure, systems and approach
to serving customers.
In this transition year, we have focused on stabilizing
the business, streamlining our operations and organizing
our company directly around the service provider market
with a more integrated, customer-driven approach to the
marketplace. In some cases, we moved to divest areas of
the company that were not central to this strategy, such
as Power Systems and Agere Systems. And we recently said
that we are pursuing a variety of strategic alternatives
for Optical Fiber Solutions so we can better focus our
resources and investments on the areas critical to our
markets.
In addition, we are reshaping our product portfolio
around the key technologies that will produce next-
generation networks. Our product portfolio reviews are
part of a new approach to making decisions about where
we invest our resources to optimize the value of Lucent.
We are moving swiftly to become a simpler, leaner, more
nimble company aimed at serving the most profitable and
promising of the more than 15,000 service providers around
the world.
WE'RE MAKING PROGRESS ON RESTRUCTURING
Since January we've been executing a comprehensive
seven-point restructuring plan to streamline our operations,
drive out $2 billion in expenses and improve working
capital by another $2 billion.
- First, late last month we successfully obtained
$4.5 billion of new 364-day credit facilities and we
amended an existing $2 billion credit facility due in 2003
for a total of $6.5 billion in credit facilities. This was
a critical step in ensuring that our cash flow needs for
the turnaround are adequately met.
- Second, we are finalizing the amount of the business
restructuring reserve and one-time charge we will be
taking in the second fiscal quarter.
- Third, we are working to reduce our expense run rate
by $2 billion annually. We have developed and begun
implementing operational plans, including budget and
headcount roadmaps, to achieve this goal.
In light of current economic conditions, we need to
accelerate our efforts to achieve this goal, and wherever
possible to exceed the cost reduction targets.
I want to congratulate everyone who has contributed to
reducing expenses, but I can't emphasize enough how
important it is to take a hard look at the need for every
expense in the weeks and months ahead. We must meet our
target.
- Fourth, as a key part of the cost reduction effort,
we said we expected to reduce our net headcount through
a combination of force reduction and attrition.
We are continuing the process of notifying employees
whose jobs are at risk. These are difficult times and
difficult decisions and, unfortunately, we do not have
work for some good people. We intend to help them find
opportunities in other companies. And we are optimistic
that the skills and talents of the people who will leave
the company will match many of the demands in today's
marketplace. We have already received hundreds of calls
from recruiters and other companies who are interested
in hiring our employees.
- Fifth, we are implementing our plans to use contract
manufacturers. Efforts are continuing with contract
manufacturers for virtually all the manufacturing done at
our Oklahoma City facility and a substantial portion of the
unit assembly and test work done at our Columbus facility.
We expect to sell all or a portion of these facilities.
- Sixth, we have begun to execute on plans to reduce
working capital. Deb Hopkins has John McGovern coordinating
a company-wide program to achieve our goal of reducing
working capital by $2 billion by the end of fiscal 2001
through aggressive management of inventory and accounts
receivables.
- Seventh, we have developed an operational plan that
calls for more selectivity in our capital investments as
we focus our efforts on unavoidable expenditures and on
projects supporting the most profitable parts of our
business and with the highest potential return. This will
help us reach our target of reducing capital spending by
$400 million in fiscal 2001 from the previously anticipated
spending rate.
WE CONTINUE TO STREAMLINE OUR ORGANIZATIONAL STRUCTURE
We are redeploying our marketing and sales resources to
address customers through a single unit to align resources
against the highest growth opportunities, move technical
resources closer to customer, improve the channels for
customer input and reduce costs from duplications in
marketing and sales support. We have recast our customer
focus leadership with Carol Spurrier and Vince Molinaro in
NAR, Mike Butcher in International, Jay Carter in Operations
and Terry Vega as Chief Marketing Officer.
We've created a single services organization called Lucent
Worldwide Services. Led by John Heindel, Lucent Worldwide
Services is pursuing high-growth opportunities that play
to one of our core competencies -- knowledge of networks.
Lucent boasts the largest, most experienced team in the
industry for network consulting, design, installation,
maintenance and monitoring.
We recently integrated our software products group with
Janet Davidson's InterNetworking Systems group and Frank
D'Amelio's Switching Solutions group to accelerate our
strategy to provide customers with next-generation solutions
for both circuit and packet networks.
Jim Brewington's Wireless group is moving strongly into
the 2.5G and 3G space.
We've combined our all manufacturing, logistics and
supply chain functions into a single Supply Chain Networks
organization under Jose Mejia. Working with suppliers, this
team has redesigned certain key products to make them easier
to manufacture while retaining the quality, reliability and
features of our systems.
We are continuing to prepare for the initial public
offering of Agere Systems and the spinoff of that business
by the fall.
WE'RE GAINING STRENGTH IN THE BUSINESS
At the same time, we continue to refine our strategy
to take advantage of our core strengths in optical, data
and wireless networking to offer segment-specific broadband
and mobile Internet solutions. In addition, our unique
capabilities in software and services combine to help us
deliver comprehensive solutions that customers need. We
are gaining strength in each of these key areas.
* We're Making Progress in Optical Networking.
The LambdaRouter is now in trial with six customers,
including Global Crossing. We are now working with Global
Crossing to design the network architecture that will take
full advantage of the LambdaRouter's capabilities.
Lucent is leading the way in 40-gigabit networking.
Global Crossing completed a successful trial of our
40G technology, and we plan to make our next-generation
40G system commercially available in 2001.
In a recent Lucent advertisement in the Wall Street
Journal, Time-Warner Telecom told the world that "Lucent
gets it" when it comes to optical networking. Our WaveStar
OLS 1.6T DWDM system is being deployed in the carrier's
next-generation optical network to keep up with demand
for broadband services.
* We're Making Progress in Internet Infrastructure.
We introduced our "service intelligent" Internet
protocol (IP) network strategy and a new member of our
IP services switch family, the SpringTide 7000, to deliver
sophisticated, business quality IP services. While we
are selling Spring Tide products, we are also positioning
ourselves to help carriers make money from next-generation
data services.
The second-generation Lucent Softswitch, which we
introduced in January, provides the intelligence for a
new network architecture that enables service providers
to quickly introduce new services and manage the
convergence of voice and data traffic on their networks.
Significant Softswitch customers include Sprint, BT Ignite
and LecStar. The "combination" of our market-leading
Softswitch and market-leading VoIP Media Gateway is unique
in the industry.
We are also adding new models to the highly successful
Stinger DSL line of access concentrators. We are the only
major DSLAM vendor with a leading market position in both
SDSL, which is targeted to businesses, and ADSL, better
suited for residential use, protocols.
* We're Making Progress in Wireless.
With an installed base of more than 45,000 CDMA cell
sites and more than 160 CDMA networks deployed worldwide,
no other wireless equipment vendor has the experience in the
technology and rapid deployment of CDMA-based networks that
Lucent does. This is an important point to consider in the
context of emerging 3G wireless technologies. The underlying
technology for the two leading ITU-approved 3G standards --
UMTS and cdma2000 -- is CDMA.
In the 3G wireless arena, we announced agreements with
Net2Wireless, MapInfo, hotpalm.com, Purple Software and
InfoSpace to enhance the content and location-specific
services that will be available on next-generation networks.
In an effort to help mobile operators deal with demand
for high-speed data services on 3G wireless networks, we
have integrated Bell-Labs developed intelligent antenna
capabilities into our next-generation base station. This
technology helps service providers incrementally increase
network capacity and data throughput on 3G wireless networks.
And the Bell Labs-developed Ocelot software system
increases the capacity and coverage of networks while helping
service providers install their networks more rapidly.
* We're Making Progress in Software and Services.
Nearly every Lucent contract and solution bears the
imprint of the Lucent software and services that overlay
and support them.
These components of Lucent solutions are critical to
breaking down the complexity of next-generation networking
and creating new revenue-generating services for our
customers, from designing and managing network elements
to deploying new IP services and bridging the packet and
circuit worlds -- software and services touch it all.
These advances, along with our deep customer
relationships, are helping us rebuild momentum in the
marketplace as we continue to see both traditional and
emerging service providers turning to Lucent for our
networking expertise.
* Since January, We Have Made a Number of Significant Sales:
- We won a major three-year $5 billion contract with
Verizon Wireless, the nation's largest wireless carrier,
which positions Lucent to become the largest supplier of
Verizon Wireless' third-generation (3G) high-speed mobile
network infrastructure.
- Verizon also selected Lucent as the supplier of
optical systems, data products, software and services
for a global telecom network linking the U.S. and major
cities in Europe, Asia and Latin America.
- Time Warner Telecom recently announced a $100 million
agreement to deploy our WaveStar OLS to deliver next-
generation broadband services.
- Sprint is deploying Lucent's integrated voice and
data solution in more than 1,000 central offices across
the country; part of a two-year, $129 million agreement.
- Deutsche Telekom and Jazztel selected Lucent for
optical networking deployments in their networks in Europe.
- We signed a multimillion dollar contract with
BT Ignite to expand and enhance its existing UK mass-
market voice over IP service with the carrier-grade
Lucent Softswitch.
- Novaxess in the Netherlands is deploying Lucent
DSL technology throughout Europe for its broadband access
network.
- Under an agreement worth up to $62 million,
HighwayOne has chosen our Stinger DSL products, as well
as software and services, to expand its DSL access network
in Germany and across Europe.
- Nextel selected Lucent to supply high-capacity
gateway switches for its digital wireless network -- the
first agreement between Nextel and Lucent.
- We won a $112 million expansion contract from
T-Mobile after being credited by them for helping launch
their high-speed data service in Germany.
- Tata Teleservices has selected us to build a
$31 million broadband network in India based on our
5ESS switch, AnyMedia Access System, Intelligent Network
Services and advanced transmission systems.
We have made progress, but there is much left to
accomplish as we complete the turnaround and position
our company for success.
We need to work together to aggressively serve
customers, introduce new technology and continue to
dramatically reduce our cost structure.
Finally, a word on press coverage. Despite excellent
non-stop efforts by Kathy Fitzgerald and her team to
emphasize the progress we've made, the press continues
to focus on the past and replay "old tapes." Unfortunately,
we will most likely see a couple of additional articles
in some of the major business publications that will be
backward looking.
Our job is to stay solely focused on continuing the
very real progress of getting Lucent back on track. The
big order from Verizon was helpful and we should celebrate
such wins as our progress becomes evident in the weeks and
months to come.
As we "look forward, not backward," we need to focus
on our customers and on doing things every day to get
Lucent back on track and make Lucent as successful as we
know it can and will be again.
Sincerely,
Henry B. Schacht |
