Lucent Technologies - Lucent's Goal: Return To Profitability

LUCENT'S GOAL: RETURN TO PROFITABILITY

The years 2000 and 2001 were difficult for Lucent. The company sold or spun off several revenue-producing units. At first it appeared that Lucent wanted to sell its non-core business assets and strengthen its core businesses. Later it became apparent that the cash-hungry company was burdened with a significant amount of debt, which caused it to sell more revenue-producing businesses, such as its fiber optic solutions unit, in 2001.

Lucent also faced a slowdown in the telecommunications market, which caused some of its customers to go out of business. The combination of a debt-laden balance sheet and a slowdown in spending by its customers made the company desperate for cash. For the quarter ending December 31, 2000—the first quarter of Lucent's 2001 fiscal year—Lucent lost $1 billion and experienced a 26 percent decrease in revenue from the same quarter of the previous year. Revenue from continuing operations declined 18 percent in the second quarter compared to the previous year, and Lucent's loss rose to $3.7 billion. In the third quarter Lucent posted a $3.25 billion loss as it accelerated its cost-cutting program by offering buyouts to some 10,000 employees. Other cost reduction measures included closing manufacturing plants and reducing the number of products. Lucent also planned to trim an additional 15,000 to 20,000 jobs by the end of 2001. Its goal was to return to profitability in fiscal 2002.