The US telecoms equipment maker Lucent Technologies yesterday announced plans to axe another 10,000 workers after warning losses would be far greater than expected thanks mainly to a $4bn (£2.6bn) charge.
The New Jersey-based company predicted it would end 2003 with about 35,000 employees, down from the 45,000 it expects to have at the end of this year, in a move that will force it to take a $1bn restructuring charge.
Lucent said it would also have to take a $3bn charge to cover the drop in value of its pension fund because of falling stock markets.
Fourth-quarter losses could be as high as $0.65 a share, or up to $0.20 a share higher than the previously indicated loss of $0.45 a share.
Frank D'Amelio, Lucent's chief financial officer, said: "In light of our revised forecasts for fiscal 2003 and our new break-even plan developed in the last few weeks, we re-evaluated several balance sheet items, including inventory." Lucent, which has been hit hard after telecoms customers reined in their spending, reiterated a 20 to 25 per cent drop in fourth-quarter revenues was still on the cards from the $2.95bn of turnover it made in the third quarter.
Patricia Russo, Lucent's chief executive, said: "Despite the market challenges, we intend to return to profitability in fiscal 2003 and we are taking more aggressive restructuring actions to bring our break-even down even further." The company is now targeting a quarterly revenue break-even rate of $2.5bn, down from its earlier estimates of $2.5bn to $3bn.
Lucent has cancelled its $1.5bn credit facility, due to expire next February, to avoid an anticipated default on financial covenants. Mr D'Amelio said: "Since we didn't expect to draw on our existing credit facility before it expired in February, we thought it made the most sense to cancel the facility now instead of risking the anticipated default on our covenants."
He insisted Lucent had "sufficient liquidity" to fund its operations and business plans. It expects to have more than $2bn of cash at the end of fiscal 2003 and is considering a "new and smaller" credit facility.
"This is a crisis," said Tom Lauria, an analyst with Avtera Management, an independent research firm in New Jersey. He said that while bankruptcy was not imminent for Lucent, "it will have liquidity issues that challenge its own survival".
Standard & Poor's reduced its credit rating on Lucent to "B-" from "B", saying distressed industry conditions might still challenge Lucent's ability to return to profitability and positive cash flows.
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