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Lucent: Slowdown not over
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December 13, 2001: 1:13 p.m. ET
Telecom manufacturer sees significant revenue decline in fiscal first quarter.
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NEW YORK (CNN/Money) - Telecommunications equipment maker Lucent Technologies Inc. told investors Thursday its troubles aren't quite over as a continued slowdown in capital spending will result in lower sales and a larger-than-expected loss in the current quarter.
It was the latest blast of bad news from the beleaguered company, and one of several negative reports released Thursday by companies in the telecom sector.
Before the U.S. markets opened Thursday, Lucent said it expects to post a loss, excluding one-time charges, ranging between 23 cents and 26 cents per share for its fiscal first quarter ending this month.
Wall Street generally had been expecting Lucent's first-quarter loss to be about 17 cents per share, according to a recent survey conducted by earnings tracker First Call.
Henry Schacht, Lucent's CEO, told CNNfn Thursday the company came out with the warning right after it realized its top line would be much lower than previously expected. He said revenue now is expected to range between $3.1 billion and $3.4 billion.
By First Call's count, expectations for Lucent's first-quarter revenue recently had been running nearer $4.5 billion.
Makers of telecommunications and data-networking equipment have been particularly hard hit by the recent general economic slowdown, as service providers and large corporations, struggling to hold onto dwindling profits, have either deferred or canceled their new-equipment orders.
Schacht pinned the blame for the earnings miss in large part on continued weakness in demand, which executives recently have suggested was showing signs of improvement.
"This is a very confusing time because all of our customers are seeing 15- to 20-percent cuts," Schacht said.
Lucent, which has been undergoing a massive restructuring, including more than 18,000 layoffs, has not provided specific financial estimates beyond the current quarter. However, it has said that it expects to return to operating profitability in fiscal 2002.
Despite Thursday's warning, Schact said the company remains on track to achieve that goal, as it strives to improve margins through higher sales volumes and continued cost reductions.
"The good news here is that even though sales are much lower than external communities had hoped, we still are able to show quarter-to-quarter improvement on the bottom line, which demonstrates the company's cost cutting," he said.
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He said product upgrades and streamlining will position Lucent to take advantage of the $200 billion worldwide telecommunications market, even with customers' planned spending cutbacks.
Schact also said the current quarter is likely to mark the bottom of a downturn in Lucent's revenue.
Even so, shares of Lucent (LU: down $0.94 to $6.79, Research, Estimates) were down more than 12 percent early Thursday afternoon. They were the most actively traded on the New York Stock Exchange.
Lucent, which has fallen behind its competitors in trying to capitalize on the move toward high-speed telecommunications networks, has seen its stock plummet more than 67 percent from a high of $21.12 in February.
In addition to layoffs, Lucent has been shedding its non-core businesses and outsourcing an increasing percentage of its manufacturing to cut costs.
Lucent, itself a spinoff from AT&T, has spun off non-core businesses, including its enterprise networks unit, now called Avaya (AV: down $0.69 to $12.81, Research, Estimates), and its microelectronics business, now called Agere Systems (AGR.A: down $0.56 to $5.58, Research, Estimates), as it moves to shore up its balance sheet and sharpen its focus on high-speed telecommunications networking equipment.
Adding to the pressure on Lucent's shares Thursday was similarly bleak news from two other companies in the telecommunications industry.
Also on Thursday, Ciena (CIEN: down $2.53 to $15.44, Research, Estimates), which makes systems that increase the capacity of long-distance fiber-optic telecommunications networks, reported a quarterly operating profit that met expectations but warned of potential operating loses moving forward.
Analysts generally had expected Ciena to log an operating profit in the current quarter, which ends in January, of 5 cents per share. Executives of Ciena also pointed to continued weakness in capital spending by service providers as the reason for the shortfall.
Meanwhile, Qwest (Q: down $0.31 to $11.79, Research, Estimates) Communications also gave a more pessimistic outlook. The company, which is the dominant local telephone company in 14 states from Minnesota to Washington, reduced its capital spending budget for 2002 to a range of $4.2 billion to $4.3 billion.
Qwest began the year anticipating a 2002 capital spending budget of $7.5 billion. 
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