Lucent Technologies made a mistake by organizing into 11 "hot little businesses" which caused duplication and increased expenses, chairman and CEO Henry Schacht told shareholders Wednesday.
The struggling communications equipment company also grew too fast and missed an opportunity to bring its optical networking technology to the market early, Schacht told about 600 shareholders at the company's annual meeting in Orlando.
"We know what went wrong. We're in the process of fixing it," said Schacht, who was reinstated as Lucent's interim chairman and chief executive after top executive Richard McGinn was fired last year.
In recent months, the company's stock price has dropped from a high of $84 late last year to a low of $12.15 at midmorning trading. Its debt rating was reduced to a notch above junk-bond status and the Securities and Exchange Commission initiated an investigation into its accounting practices. The company also reported a 26 percent decline in revenues in the first fiscal quarter of 2001.
But Schacht promised the company would get back on track through a restructuring plan that centralizes the company's operations, reduces the company's expense run rate by $2 billion annually and cuts the workforce by up to 16,000 employees. The company also plans to reduce capital spending by $400 million this year and is negotiating a new $4.5 billion line of credit to help meet cash flow, he said.
Frustrated shareholders, while appreciating Schacht's candor, found little consolation in his promises for improvement at the formerly highflying Lucent, the AT&T; Corp. spinoff which is one of the most-widely held stocks in the United States.
"Since we're here in Orlando, I would say Mickey Mouse and Goofy could have done as good a job running this company," shareholder Martin Glotzer told Schacht.
Shareholder Jack McConnell told the chairman, "These are major mistakes. Has anyone paid the price but us?"
One way Lucent may raise billions of dollars is through the sale of its profitable optical-fiber business. A deal to sell the Georgia-based operation, the world's second-largest producer of fiber-optic cable behind Corning, could come as soon as next month, The Wall Street Journal reported Wednesday, citing people familiar with the matter.
Schacht refused to comment on what he called "rumors."
Lucent also plans to spin off Agere Systems, a 16,500-worker unit that makes optical components and communications semiconductors, by the end of the summer after an initial public offering at the end of March. It will be based in Allentown, Pa.
In other business, shareholders overwhelmingly approved Franklin Thomas to another three-year terms as a Lucent director and decided to let employees buy stock through payroll deductions.
Shareholders also narrowly approved a shareholder proposal requiring directors to be elected every year instead of every three years. The vote, however, isn't binding since an 80 percent vote is required to change the company's bylaws; the company, which had opposed the measure, will take the vote under advisement.
The board currently has a vacancy caused by the resignation of former director Paul H. O'Neill when he was appointed U.S. Treasury Secretary last year.