Lucent's woes keep mounting

By BBC News Online's North America Business Reporter, David Schepp

Things could not look worse for Lucent.

Drowning in debt and selling off assets left and right, the struggling telecommunications giant said on Tuesday it lost nearly $2bn (£1.3bn) during the latest three-month period.

But stockholders are not the only ones getting stung in this latest round of bad news.

Latest for Lucent

Loses $1.89bn in latest quarter

Announces additional layoffs of up to 20,000

Delays full spin-off of Agere unit

Announces sale of fibre-optic unit

Lucent employees were dealt a blow after the once high-flying company said it was slicing 15,000-20,000 more people from its payroll.

It is a prescient example of how the apple does not fall too far from the corporate tree. Lucent's former parent, AT&T, is also struggling to regain its financial footing by laying off employees and restructuring its businesses.

Falling share price

Lucent also said it needs to delay its full spin-off of its Agere Systems unit for up to six months as it restructures its debt, as part of its deal with creditors.

Lucent's share price - like AT&T's - has been severely crunched in the recent downturn in tech stocks. Lucent shares are off 92% from their all-time high of $84.19.

On Tuesday, following Lucent's profits announcement, its shares fell around 17% to $6.50 in New York Stock Exchange trading.

Lucent is not alone, however. In the last year, investors have lost tens of billions of dollars as telecoms companies have languished from manufacturing overcapacity and slack demand.

Bright beginnings

When Lucent was spun off from AT&T in 1996, shareholders snapped its shares, sending its stock price climbing steadily in the face of a bright future.

At the time, investors felt Lucent's trump card was the esteemed Bell Laboratories, the research arm of AT&T credited with inventing the transistor in 1947, among other things.

In recent years telecommunications stocks have come under great pressure to perform in a mature US market, as profit margins have eroded within the sector.

Within the last year, however, shares of the communications-equipment maker have tumbled over 87%, after reaching a high of $64 a share last summer.

At the time, the company endured a tech-stock tumble and struggled to define its businesses.

In January, the company said it was laying off 10,000 employees and would take a charge of as much as $1.6bn to cover the layoffs.

Lucent continues to face myriad woes, including rumours about a possible bankruptcy and a botched stock float for its optical-networks business, Agere Systems.

The company is also saddled with debt and lacks the management leadership its needs to guide it back to guide it through troubled times.

Failed deal

In May, a merger deal with Alcatel fell apart after disagreements over the structure of the combined company's board and management control.

Lucent is unlikely to find another company that is willing to take the company lock, stock and barrel. If the company does get sold, it will be in piecemeal - not one fell swoop.

All of this may leave Lucent chief executive Henry Schacht scratching his head, seemingly having tried everything to right the ailing company under his command.

For now, Lucent must continue to focus on its restructuring plan to reduce expenses as well as to sell-off its non-core businesses, analysts say.

Analysts agree that there are few other suitors willing to take the company as-is.

"Who else is out there who would take on a nightmare like that?" said one trader, who specialises in trading takeover stocks.