By Jim Duffy
The Edge, 07/31/02
Lucent's third-quarter results indicate there will be no recovery in telecom for awhile.
Lucent last week posted its ninth-consecutive quarterly loss and said it would cut 7,000 more jobs. The company recorded a net loss of $7.91 billion for the quarter vs. a $3.24 billion net loss in the same period a year ago.
Lucent also took a noncash charge related to deferred tax assets of $5.83 billion. Revenue for the quarter plunged 50%, to $2.95 billion from $5.89 billion in the year-ago period and off 16% sequentially, a greater drop than the 10% to 15% slip the company disclosed in a June warning.
The culprit once again is sharply curtailed capital spending among service providers. The spending constraints have intensified and are remaining in place longer than anybody expected, Lucent CEO Patricia Russo says.
This translates into at least another year of doldrums for our sector.
"The telecom industry is still caught in a downward spiral of weak investor confidence leading to lower service provider spending, leading to massive restructuring of equipment vendors and component makers," says analyst Bill Lesieur, director of Technology Business Research in Hampton, N.H. "2002 and most of 2003 will be an unprofitable year for many telecom equipment vendors."
Pro-forma revenue outside the U.S. was down 52% from the third quarter of 2001, while U.S. revenue fell 42% from the same period a year ago. On a sequential basis, pro-forma revenue dropped 15% in the U.S. and 18% outside the U.S.
Revenue from wireline network hardware tumbled 61% from last year's third quarter, and 21% sequentially. Switching/access and optical revenue declined 20% and 25%, respectively.
During the quarter Lucent shut down its LambdaManager product and dramatically reduced its development effort on the LambdaRouter given weakness in the optical market. Analysts are currently modeling flat overall wireline revenue of $6.5 billion for Lucent in 2002 and 2003.
Revenue from mobile wireless infrastructure decreased 2% compared with last year and 8% from last quarter. Analysts estimate that 75% of Lucent's mobility revenue is tied to CDMA.
But the outlook for CDMA spending in the U.S. does not suggest growth in 2003, analysts say, because Verizon and Sprint will finish 1xRTT upgrades in September. Therefore, Lucent - the No. 1 player in CDMA infrastructure - may actually see mobile equipment revenue decline in the low single digits in 2003 compared to 2002, analysts say.
Lucent did not provide guidance for its fourth quarter because of "ongoing market uncertainty," but said it still plans to be profitable late in its 2003 financial year, which begins in October.
The job cuts will drop Lucent's workforce to 46,000; Lucent employed 53,000 people as of June 30. The company said it is preparing "further actions" so it can reach breakeven on revenue below $3.5 billion, which could mean even more cuts - Lucent expects to slim down to 45,000 employees by year-end.
Eighteen months ago, Lucent employed 106,000. |
