Table: Static for Lucent

The telecom-gear maker has lost $5.5 billion since the start of fiscal 2001. It insists it will return to profitability by 2003, but analysts see losses of $2 billion in 2002 and $750 million in 2003. Here's why:CAPITAL SPENDING DECLINES

The telephone companies that purchase Lucent (LU

) gear have too much debt and too much network capacity, so they are slashing costs. Industry spending on equipment, which is key to profitability, is expected to drop 11% in 2002, and 3% in 2003.PRICES ARE FALLING

The price of telecom equipment is dropping by 30% a year. That's one major reason why Lucent's revenue is expected to plummet 30% in 2002, to $14.8 billion. And gross margins, which peaked at 40% in 2000, fell to 13% last year.COST-CUTTING EASES OFF

Lucent has slashed its workforce to 62,000 employees, down from a previous 106,000. Furthermore, it cut capital outlays from $1.4 billion in 2001 to $750 million in 2002. Additional cost cuts will be tough without losing key talent.CREDIT RATING AT RISK

Lucent's credit rating is already in the middle of the junk-bond tier. Several credit rating agencies still have a negative outlook on the company's debt. If it doesn't return to profitability soon, they could lower their ratings again, increasing Lucent's borrowing costs.

Later, Baby

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