Telecoms shaken as Lucent ousts chairman and warns on sales

Lucent Technologies, the struggling telecommunications equipment maker, yesterday ousted its chairman and chief executive, Rich McGinn, replacing him with the former chairman Henry Schacht. The company also slashed its sales and profit outlook for the first quarter of 2001.

Lucent Technologies, the struggling telecommunications equipment maker, yesterday ousted its chairman and chief executive, Rich McGinn, replacing him with the former chairman Henry Schacht. The company also 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.

Shares of Lucent initially fell to $213?16, but recovered to $235?8, up $1, in late-morning trading in New York. The stock has dropped more than 71 per cent so far this year.

The announcement of the trading slowdown hit other telecoms equipment shares, with Marconi closing down 1.9 per cent at 920p, after trading as low as 899p. In France, Alcatel was down 0.6 per cent.

Rumours of Mr McGinn's demise have swirled for months. Lucent has cut its growth forecasts four times this year, introduced new products later than its competitors, and failed to keep up with customer demand for optical networking products. Although Mr McGinn had said the company's problems were fixable, investors and analysts had said a bold management shake-up was needed.

"They should have gotten rid of McGinn after Q1 [of 2000], but the board didn't know what to do. The board was all hand-picked by McGinn. With a new person coming in, I think they will all be gone too. It will be a whole new board," Frank Dzubeck, president of consulting firm Communications Network Architects, said.

Lucent said it expected pro forma revenue from continuing operations to decline about 7 per cent 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 the research firm First Call-Thomson Financial. Lucent was due to release its fourth-quarter results after the stock market closed last night.

Mr 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," he said.

Lucent 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. Analysts expect Lucent to look outside the company for a new chairman and CEO, saying that it needs a fresh approach to tackling its problems and a unbiased executive who can cut back the bloated company.