Lucent Sees Growth in Second Quarter
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By Ben Klayman
CHICAGO (Reuters) - Telecommunications equipment giant Lucent Technologies Inc. (NYSE:LU - news) on Tuesday posted a fiscal first-quarter loss amid a severe telecom spending slump and said it will cut at least another 7,000 jobs, but added it was past the bottom with anticipated second-quarter growth.
The Murray Hill, New Jersey-based company reported an operating loss before an income-tax benefit and other items of $1.28 billion, but it also said the quarter was the low point for its revenues and demand has stabilized.
``There certainly is no sign of an upturn yet, but everything has been relatively stable now for the last 90 days,'' Chairman Henry Schacht told Reuters in a telephone interview.
Lucent, which has reported net losses totaling $16.2 billion in the last four quarters, said last month it believed the first quarter would mark the low point of the market downturn for its revenues.
Lucent said it intends to cut its work force through June by at least another 7,000 jobs, or 11 percent, to below 55,000 -- 2,000 below the previous lowest estimate. The cuts would be made through two previously announced divestitures and outsourcing of some manufacturing operations in Massachusetts.
It employed 62,000 at the end of December and previously said it would cut its work force to as low as 57,000 by the end of March. When it launched its restructuring last January, Lucent employed 106,000.
After rising as much as 8 percent, Lucent's stock closed up 1 cent at $6.70 in heavy New York Stock Exchange (news - web sites) trading on Tuesday.
Since last January, when the company launched its restructuring, Lucent's stock has fallen 50 percent, but outperformed its peers in the Standard & Poor's Communications Equipment Index. (^GSPCOMM - news) by about 6 percent.
Lucent said it expects second-quarter revenues to grow 10 percent to 15 percent from the first quarter, while earnings will improve faster. The guidance means Lucent would post revenues of between $3.8 billion and $4 billion next quarter.
Analysts were expecting the company to post a second-quarter loss of 17 cents a share on revenues of $3.42 billion, according to Thomson Financial/First Call.
WAITING IN THE WINGS
``We're beginning to see the bottom ... but the fat lady hasn't sung yet,'' CIBC World Markets analyst Steve Kamman said. ''I think there are a couple more restructuring items to go.
``Given the past four quarters, we're sort of in a show-me-the-money phase,'' he added.
Telecom suppliers, including Lucent rival Nortel Networks Corp. (NYSE:NT - news)(Toronto:NT.TO - news) and networking giant Cisco Systems Inc. (Nasdaq:CSCO - news), have been hit hard by the telecom spending slowdown over the past year. Last week, Nortel reported a steep slide fourth-quarter sales and said the economic downturn was still weighing on customers' spending plans.
Lucent, spun off by telephone giant AT&T Corp. (NYSE:T - news) in 1996, said on Tuesday that its break-even point will be cut to $4.25 billion in quarterly revenues from $4.75 billion by the end of the fiscal year in September. It also repeated it will hit profitability this fiscal year.
Investors and analysts applauded the company's improved cash flow, introduction of higher-profit products, and halving of its customer financing commitments.
``The restructuring plan absolutely has traction. They have their hands around the issues,'' said David Katz, chief investment officer of Matrix Asset Advisors, an investment management firm with almost 1.2 million Lucent shares.
However, several analysts questioned the company's outlook on the conference call, saying the return to profitability this year could be delayed into fiscal 2003 given market uncertainty.
``The answer is you can't get there from here. It's magic,'' said an analyst, who asked not to be identified.
Lucent's first-quarter gross profit margins were 13.7 percent of revenues, up 2.2 points from the previous quarter, and they could hit the 20s in the second quarter. Some analysts were projecting gross margins of about 22 percent in the near term, leaving Lucent with a fourth-quarter operating loss.
MUST TOP EXPECTATIONS
``We clearly have to do better than the (analysts') models currently call for in both gross margins and expense reduction and obviously we think we can do it,'' Schacht told Reuters.
The company has a gross-margin target of 35 percent in fiscal 2003 through a combination of improved sales and product mix and lower one-time items like inventory charges.
Lucent's first-quarter operating loss, before the income tax benefit and other items, was $1.28 billion, or a loss of 23 cents a share, compared with a loss of $2.1 billion, or a loss of 42 cents a share, the previous year.
After the benefit, its loss was $757 million, compared with a loss of $1.437 billion the previous year. Ongoing revenues fell to $3.47 billion from $3.8 billion in the year-ago quarter, and $4.8 billion in the previous quarter.
Lucent said last month that its first-quarter loss would be larger than Wall Street expected because of the prolonged spending slowdown. It said its loss from continuing operations would be between 23 cents and 26 cents a share on revenues ranging between $3.1 billion and $3.4 billion.
Lucent's net loss for the first quarter was $423 million, or 14 cents a share, compared with a year-ago net loss of $464 million or 14 cents a share. The 2001 net loss included a loss from discontinued operations, the effect of accounting changes and a one-time gain for the sale of a business. |
