Telecoms stocks plunge on profits warning

WHAT? AT&T and Lucent still have the ability to shock

Profits warnings at two of the US's largest telecoms companies have caused their share price to plummet.

The telecoms company AT&T lost nearly 10% of it value, and its spinoff, Lucent Technologies, lost nearly 20% as profit warnings from the two companies caused panic in the high tech markets.

The Nasdaq blood bath

The largest telephone company in the US, AT&T, halved its revenue-growth predictions from about 5% in 2001 and said it will reduce its dividends payout from 22 to 3.75 cents per share

And the giant telecoms equipment supplier, Lucent Technologies said it will slash $1bn in costs and overhaul its business after losing much more money than it had expected during the last three months.

Lucent's share price fell to its lowest level in more than 3 years when traders found out that the company's losses will be 25 to 30 times as large as they had expected.

AT&T's share price fell to levels not seen in a decade due to concern about its level of debts.

"The dividend cut is further evidence that AT&T is in trouble," the man in charge of the New York State's pension fund, Carl McCall, said.

It follows worries that European telecoms companies like BT are also heavily in debt after spending billions to buy the next generation of mobile phone licenses.

Expensive no more

In pre-opening trade on Thursday, Lucent's share price stood at $13.50, below the company's 52-week low of just more than $14, and seriously behind its 52-week high of $83.75

The plunge in the stock's value pulled down the value of technology shares across the board, both in the US and around the world's stock markets, on Wednesday.

And it added to the gloom about high-tech stocks that has seen the value of the Nasdaq high-tech index fall more than 50% from its high in April.

Restructuring

The stockholders' panic was shared by many Lucent employees.

About 12,000 jobs will go if analysts are right.

They predict that the company will make the savings by writing off assets and cutting its work force by 10%.

Lucent said it will restructure its product lines, consolidate the functions of its corporate centres, eliminate duplications in its marketing operations and streamline sales support.

Long slide

Lucent's stock value has fallen 80% in 2000 because the company has missed profit-growth targets, fallen behind other firms in the lucrative optical networking market, and due to its difficulties in making and introducing new products.

Its latest earnings warning came after Lucent has been hit by the telecom sector's wider problems, said analysts.

Its customers - ranging from phone companies to internet service providers - now spend less on equipment than they used to because of a widespread cash-flow problem in the telecoms industry.