Lucent Technologies (LU) surged Tuesday as the network gearmaker told Wall Street it's ready for another shake-up.
Shares jumped 8% after Lucent posted
solid wireless sales and said its latest business reorganization would mean more job cuts.
The Murray Hill, N.J., telecom equipment maker says combining its flagging, old-line phone gear business with its growing, wireless-infrastructure unit will help cut costs.
Lucent also stuck with its growth projection and, in a blast from the past, said it is back in the lending business, helping to finance its customers' equipment purchases.
On the jobs front, Lucent executives talked Tuesday about the opportunity to remove duplicate jobs as the company's two main units combine.
"It's too soon to tell" how many jobs will be cut, said CFO Frank D'Amelio on a conference call with analysts Tuesday. The company did say that it has fired 800 people in the past two months, or about 2% of its total staff of 31,000.
Lehman Brothers analyst Steve Levy says he expects there will be more cuts coming as the company combines its integrated network services, or INS, division with its mobility unit. But he adds that he expects any cutbacks won't be "drastic." Levy estimates that between 400 and 600 more employees will be let go by the end of September.
Cuts have become commonplace over the past five years among the big telecom gearmakers like Lucent,
Lucent only recently completed a series of dramatic cuts in its attempt to keep pace with the collapse of the phone industry and the steep dropoff in demand for networking equipment. Lucent's staff is about a quarter of its peak size in 2000.
But now, with its big phone customers -- including
-- consolidating, Lucent faces yet another twist in the persistent postbust spending slowdown. This predicament, along with ongoing legal issues related to past accounting and corruption scandals, helped push the stock to 52-week lows.
There has been one bright side to all the gloom: wireless growth.
The bad news is that telcos have had to shift spending from the conventional phone switches and network systems. The good news is that the money has been channeled to accommodate ambitious wireless expansion plans.
In the latest quarter, Lucent's wireless equipment sales grew 4% over the prior quarter ended in December, largely on the strength of accelerated building plans by
. Verizon Wireless, jointly owned by Verizon and
, is speeding up its evolution data only, or EV-DO, upgrades in order to beat rivals Sprint and
, itself a joint venture of SBC and
, to the market with fast wireless Net access service.
Always on the hunt for new network construction opportunities, Lucent says it has recently revived its controversial vendor financing practices. In emerging markets like Asia and other regions, Lucent must compete with outfits like
of China, which has been helping grease sales by offering financing.
Lucent has yet to fully recover from former CEO Rich McGinn's boom-era lending binge. At one point in late 2000, the company had amassed a staggering $7 billion in customer-loan commitments as equipment buyers found
easy money from Lucent when other financing sources dried up.
But with credit problems of their own to mend, the big equipment vendors like Lucent and Nortel were forced to swear off the special sales sauce.
Now, more prudent than ever, Lucent says it is lending money to finance sales in selective deals, especially in markets where rivals are offering customers cash.
On the conference call Tuesday, Lucent CEO Pat Russo said the company "will deploy it if and where it makes sense."
Reassuringly, she added that Lucent can quit any time if it wants to.
"We can walk away," said Russo, referring to financing deals that aren't quite up to snuff.