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ADC Expects 2nd-Quarter Loss

Telecom: Equipment maker plans to cut as many as 4,000 more jobs amid slowdown in customer spending.

March 29, 2001|YUKARI IWATANI | REUTERS

CHICAGO — ADC Telecommunications Inc. said Wednesday that it plans to cut 3,000 to 4,000 more jobs and expects to report a loss for its second quarter, reversing its previous profit forecast, citing a slowdown in customer spending.

The telecommunications equipment maker already has eliminated about 3,000 jobs in fiscal 2001. The two reductions comprise about 25% to 30% of ADC's work force at the beginning of its fiscal year.

ADC, which said it will take restructuring charges of an undetermined amount, is the latest telecom company hurt by a lagging economy and slower capital spending. Others include Nortel Networks, which Tuesday cut its first-quarter profit forecast to a loss, Motorola, Cisco Systems and Lucent Technologies.

ADC's stock fell $2.34, or 22%, to close at $8.22 on Nasdaq. Earlier in the day, the stock reached a new year-low of $8. Over the last year, it has outperformed the Nasdaq telecom index by about 8%.

"We're seeing a phenomenon we haven't seen before, which is the carriers globally, particularly in North America, haven't cut their capital budget significantly, yet they're not releasing them for full-blown spending at the rate they budgeted," said Richard Roscitt, ADC's newly appointed chairman and chief executive.

ADC forecast a second-quarter loss of 10 cents to 15 cents a share, excluding restructuring charges and other items, compared with a year-ago profit of 10 cents. Analysts on average were expecting a profit of 9 cents, according to First Call/Thomson Financial.

The company said it now expects sales of $650 million to $700 million for the quarter, as much as 16% less than the $771 million in the year-ago period.

In February, ADC said it would earn 9 cents to 10 cents a share in the second quarter on sales of $825 million to $870 million.

ADC, whose products are used for high-speed Internet and voice lines, also warned of lower-than-expected sales and earnings for fiscal 2001, but would not provide details.

ADC said it will focus more deeply on four product areas: optics, digital subscriber lines, Internet protocol cable and software. However, it will continue to support its core profit drivers--fiber and copper connectivity, and systems integration services.

Non-core operations include video and wireless products and filters, said Roscitt, who expects to announce in May whether the company will exit or sell some of those. Other belt-tightening measures include cutting plants and discretionary costs and eliminating most outside contract and temporary employees, ADC said.

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