ADC Joins Procession Of Telecom Layoffs, Earnings Warnings



Continuing the slump in the telecommunications industry, broadband equipment maker ADC Telecommunications Inc. on Wednesday said it will lay off 3,000 to 4,000 employees and that earnings for its second fiscal quarter would fall short of expectations. The staff reduction is in addition to 3,000 layoffs disclosed earlier this year.

In a conference call with analysts, CEO Richard Roscitt said the reductions were not simply an across-the-board cost-cutting measure, but rather resulted from extensive analysis of the health of each of the company's product lines. Roscitt said, for instance, that ADC would not cut research and development staff in its strongest core technologies, such as fiber and copper connectivity and systems integration. "These are very surgical cuts," said Roscitt. "In effect, we're forming the new ADC." The company provides broadband and network equipment primarily to telecommunications service providers.

ADC execs said they expect sales for the second quarter ending April 30 to be between $650 million and $700 million, down from $771 million from last year's second quarter, and that the company will register a pro forma loss of as much as 15 cents per diluted share for the quarter, compared with a pro forma profit of 10 cents per diluted share a year earlier.

Ted Moreau, an analyst with Robert W. Baird & Co., said that while the news from ADC wasn't a surprise in light of the recent rash of layoffs and earnings warnings from networking bellwethers like Cisco Systems and Nortel Networks, he continues to be shocked by the magnitude of the slowdown in the industry. "They're all hitting a brick wall," says Moreau. ADC's struggles, he says, are tied to reduced spending by telecom carriers, but he expects spending habits to increase when the economy shows signs of recovery.

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