An additional 10,000 job cuts are coming at telecommunications networking company Lucent Technologies Inc. as the market for its products continues to fizzle.
In an announcement today, the Murray Hill, N.J.-based company said it will lay off another 10,000 workers by the close of its 2003 fiscal year, which ends Oct. 1, as it continues to cut costs in an attempt to ride out tough economic conditions in the technology sector.
Lucent has been cutting jobs since 2000 as it has sought to stabilize its economic health, which has been hit hard by the economy and huge drops in corporate IT spending. Last April, Lucent announced that it would reduce its workforce to 50,000 from about 62,000. Later, the company estimated that it would cut more workers, leaving about 45,000 employees.
The latest layoffs are part of what the company said is a more aggressive restructuring plan than previously announced.
Bill Price, a Lucent spokesman, said the company has about 47,000 workers, of whom 2,000 were previously scheduled for layoffs by the end of December. The company now expects to have about 35,000 employees by the end of fiscal 2003, he said.
"Clearly, we are in an unprecedented time in terms of telecom and the decline in spending," Price said. Yet despite the layoffs and continuing glum outlook, Lucent expects to be profitable by the end of fiscal 2003 due to the cuts and other adjustments it's making, Price said. "Certainly, this is a difficult period to be in telecom and going through this crunch, but we do have a break-even plan."
To reach that goal, Lucent will focus on markets where customers are spending now to beef up existing systems, rather than working on new products that would be hard to sell in lean times.
"Customers are going through the crunch, too," Price said. "Our customers are looking at their networks to leverage what they have."
Jeff Kagan, an independent telecommunications analyst in Atlanta, said that for Lucent and competitors in similar straits such as Nortel Networks Ltd., conditions will worsen until the market hits bottom and stabilizes.
"The future for companies like Lucent is still bright because, when customers start spending again," they'll turn to Lucent and its competitors, he said. "It will be healthy growth again," but Lucent will likely be a lot smaller than when it began. "They're not like a service provider where they have recurring revenues."
Lucent and Nortel made so many acquisitions of other companies in recent years that they grew too large too quickly, with too many employees to maintain, Kagan said. "When the spending stopped, they were left hanging."
"These companies aren't going to just wither up and die away, but they will be much smaller," Kagan said. "There's more to come."
In its announcement today, Lucent also said it still expects an estimated 20 percent to 25 percent decline in the fourth quarter from third-quarter revenue of US$2.95 billion.
The company will take a restructuring charge of about $1 billion to pay for the layoffs and other expenses. A previously expected pro forma loss of 45 cents per share for the fourth quarter is expected to go even higher, perhaps to as much as 65 cents per share, according to the company.
Lucent will also record a charge to equity of about $3 billion due to a decline in pension assets in its management pension plan, as part of the changes.
Lucent will announce its quarterly earnings Oct. 23.