Telecom Blues Pound Service Providers And Manufacturers
The telecom sector's continuing slide produced more job cuts, financial losses, and dismal projections last week. AT&T (T-NYSE) reported a loss of $975 million for its first quarter, more than five times the $192 million loss it reported for the same period last year. The company blames declining prices and lower customer spending on telecom services because of the weak economy for an 11.3% decline in revenue, to $12.02 billion. On a positive note, IP services increased 37% compared with last year, AT&T says.
Rival WorldCom Inc. (WCOM-Nasdaq) reduced by about $1 billion its 2002 sales forecast for its data and Internet services business, WorldCom Group. The company blamed the familiar culprits of price-cutting and low telecom spending. Net income for WorldCom Group declined 65% in its first quarter to $184 million, while the parent company's consolidated net income dropped 78% to $130 million.
The manufacturing side of the business didn't have a good quarter, either. Mobile-phone maker Ericsson LM Telephone (ERICY-Nasdaq) faces debt-burdened telecom operators canceling or postponing orders, contributing to a 25% decline in first-quarter sales and a net loss of $286 million. Last year marked the first annual loss in the company's history, and CEO Kurt Hellstrom says it will be "well into next year" before Ericsson returns to profitability. To get there, the company will cut costs by eliminating about 17,000 jobs by December 2003, leaving it with 65,000 employees.
By cutting $2 billion in annual expenses, Lucent Technologies Inc. (LU-NYSE) narrowed its second-quarter net loss to $535 million, down from $3.69 billion in the year-ago quarter. It was Lucent's eighth consecutive quarterly loss. Revenue fell about 40% as customers such as Qwest, Sprint, and Verizon trimmed spending. Lucent says it will cut 6,000 jobs.
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