Lucent Puts On a Happy Face

Jul 25 2001

Smile! At least you're not Lucent CEO Henry Schacht. And if you are Henry Schacht, you're smiling anyway, trying to convince investors that the latest round of lemons is a succulent batch of lemonade. "We will emerge from this restructuring leaner, quicker and more focused," said Schacht of Lucent's plans to sack as many as 20,000 more people, take up to $9 billion in charges, stop paying dividends and sell off plants and its fiber-optics unit. Oh, and Lucent missed its earnings forecasts again. Yipee!

The fiber-optics sale had been anticipated, but the rest of the package wasn't well received. In fact, it "raised new questions about ailing telecom-equipment maker's ability to recuperate," said CBS MarketWatch. Lucent's total job cuts "rank among the largest and fastest in the history of big American corporations," said the New York Times . The Financial Times also brought out a superlative about this "corporate epic," calling Lucent's past re-org "one of the most painful restructurings ever undertaken by a big U.S. company." Lucent's plan to rearrange things further, said the FT, is "unthinkable." Schacht's version: "It's no darned fun."

Some reporters on the Lucent beat took off their gloves. "Things could not look worse for Lucent," said the usually polite BBC News Online. Fortune's Andy Serwer, who never wore any gloves in the first place, compared Lucent's "stinko" stock to the Hindenberg and wondered if Lucent hired 40,000 too many employees in the first place. Some analysts wonder if Lucent will ever be profitable again, said the New York Times, predicting that "even if Lucent emerges from its crisis ... will be a shadow of its former self." The Times interviewed an anonymous New Jersey employee who complained, "Nothing has been said by management, and we are reading these reports, so morale and work motivation is extremely low."

But for every person out to bury Lucent, there seems to be one to praise it. The Times also got this quote from an unnamed female employee: "We need to streamline and make Lucent more profitable, so while we'll miss a lot of people, the cutbacks are necessary for the future." LightReading.com quoted Schacht's repeated reassurances like "We have every confidence we can do this." CBS MarketWatch and Investor's Business Daily must have some hope for Lucent, since they called the latest layoffs a "stunner" and a "surprise," respectively. Analysts are "hopeful Lucent's plight can't get much worse," said the IBD. A portfolio manager and TheStreet.com source seemed to agree and said he'd buy Lucent stock now if he didn't already own some.

At least TheStreet's source, while bullish on the stock, recognized Lucent's bad news for what it was. "If they're going to package all the crap up in a big bag," he said, "this appears to be the big bag."

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