Telecommunications equipment maker Avaya, Inc. said on Monday that it will slash 1,900 jobs, or a little over 8 percent of its workforce, and sell a stake in the company following lower-than-expected revenue for its fiscal second quarter.
"We are vigorously attacking the bottom line, making strong progress in both cost and expense reductions," said Garry McGuire, Avayas chief financial officer, in a conference call Monday morning.
McGuire said that Mondays announced headcount reductions, which will result in about $180 to $200 million in costs, are part of a strategy laid out in January to reduce annual expenses by $200 to $250 million. McGuire said physical assets are also being reviewed for possible sale.
Last year, Avaya cut approximately 5,300 jobs mostly through early retirement and some layoffs. Lynn Newman, a spokesperson for Avaya, said among the 1,900 jobs cut Monday are 450 from the Omaha, Nebraska connectivity solutions division, previously announced in January. Other job cuts are company wide, with most coming in the United States, she said.
Avaya announced that its second quarter revenue will be in the range of $1.24 to $1.28 billion, down from the $1.25 to $1.36 billion originally projected. The company will record a net loss, on an "as reported basis" of between 68 cents and 72 cents per diluted share. This includes a restructuring charge of approximately $100 million and a one-time retained earnings charge of $130 million associated with the conversion of preferred stock and warrants owned by Warburg Pincus Equity Partners.
Avaya said that Warburg Pincus will purchase over 14 million shares of Avaya common stock at a price of $6.26 per share, and will convert another $438 million of its Avaya preferred stock into over 38 million shares of Avaya common stock. Warburg Pincus will also exercise of warrants to purchase approximately 286,000 more shares of Avaya common stock.
As a result of the stock transactions, Warburg Pincus will own about 53 million shares of Avaya common stock or approximately 15.5 percent of the total outstanding.
McGuire also said that Avaya is seeking to raise as much as $100 million in new equity. He also said that he expects Avaya to return to profitability in fiscal 2002.