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Tuesday, 24 April, 2001, 15:18 GMT 16:18 UK
Tech firms rack up huge losses
No smiling at Lucent as it battles bad loans and accelerates lay-offs
The tech gloom continues to deepen, with three of the biggest US telecoms companies reporting huge losses and a fresh round of job cuts, including 950 in the UK.

AT&T, the telephone and cable television operator, said it made a net loss of $366m (255m) in the first quarter.

Lucent Technologies, the telecoms equipment giant formerly part of AT&T, announced a $3.7bn (2.6bn) operating loss for its second quarter and said it would acclerate plans to shed 10,000 jobs.

Both firms had posted profits in the corresponding quarter last year and are now pursuing far-reaching restructuring plans in attempts to return to financial health.

JDS cuts in the UK

Meanwhile the world's biggest fibre-optic components supplier JDS Uniphase said it made a $1.3bn third-quarter net loss and would be cutting 5,000 jobs or 20% of its worldwide workforce because of lower spending by telecoms companies.

In addition to the factory closures at Oxford, Bracknell and Hill End in Fife, 400 jobs have been cut at Plymouth.

Meanwhile Agere Systems, Lucent's semiconductor and optical components business that was floated last month, announced 2,000 job cuts of its own, representing 11% of its workforce.

Much of the damage to Lucent's performance was done by investments in and loans to Winstar, a broadband communications provider which has filed for bankruptcy protection.

Winstar has recently launched a $10bn claim for damages against Lucent for what it says was a breach of vendor financing agreements.

Write-down

Lucent, which said Winstar had defaulted on loans, said it had now fully provided for the loans. This provision and the write-down of equity investments in Winstar and others cost Lucent $510.1m in the quarter.

Lucent also said that, under a revised restructuring plan, 8,000 of the 10,000 job losses it had announced earlier this year would go sooner than previously expected.

The other 2,000 job cuts have already been made.

To help pay for these measures, the company said it was taking an increased $2.7bn one-off charge - compared with a previously estimated $1.2bn-1.6bn.

Full impact to come

"As we've said, fiscal year 2001 is a transition and rebuilding year for Lucent," said chairman and chief executive Henry Schacht.

"Despite market conditions, we expect modest sequential improvement on the top line and... greater sequential improvement on the bottom line... as we feel the full impact of the restructuring programme in the third and fourth quarters of 2001."

Lucent - formerly known as AT&T International - was spun off from its parent in 1996 and was once the world's biggest telecoms equipment supplier.

But it has struggled to compete in the key optical networking market and faced falling demand for its core telephone equipment products.

Some analysts have been sceptical that the restructuring will have the desired effect. They have said the company might be able to improve its financial position with cost cuts but will struggle to compete, given its current product portfolio.

JDS Uniphase speculation

Lucent shares have dropped nearly 90% on the New York Stock Exchange in the past year.

They closed on Monday at $9.20, well down on the 52-week high of $67.19.

Recently, Lucent said rumours that it was on the verge of bankruptcy were "absolutely false".

Despite the heavy losses, Lucent shares rose slightly in early electronic trading on Tuesday as investors weighed the possibility that JDS Uniphase would make a move to buy Lucent's fibre-optic cable unit.

Shares in JDS - which on Tuesday announced a $1.3bn third-quarter loss and the axing of 5,000 or 20% of its workforce - fell.

"Our industry is in a near-term downturn and we must act decisively," said JDS co-chairman and chief executive Jozef Straus.

"While employment reductions... are extremely difficult, we must prepare for the future by creating a product portfolio and cost structure that will permit us to continue to serve the needs of our customers and grow with our markets."

AT&T hit by competition

AT&T, which intends to split into four separately traded companies, was hit by increased competition and weaker revenue from long-distance telephone calls.

"Our growth businesses continue to drive solid revenue gains," said chairman and chief executive C Michael Armstrong.

Wireless and broadband services both delivered substantial revenue growth.

Under the restructuring plans, AT&T is to sell $3bn worth of AT&T Wireless shares within six months of the split-off while AT&T Consumer stock will be distributed to common shareholders later this year.

Plans also call for the public offering of a stake in AT&T Broadband "toward the end of the year".

Shares in AT&T have fallen 55% to about $22 in the past year over concern about the weaker long-distance market and unease over the huge restructuring plan.



Analysis
See also:

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