Avaya Eyes More Layoffs

After reporting a net loss of $37 million for Q3, Avaya looks to further reduce expenses.

Avaya Inc. battled a continued drop in earnings for its third fiscal quarter and now is planning to make further cuts in the fourth quarter.

The Basking Ridge, N.J., company on Monday reported a net loss of $37 million for the quarter ended June 30, which included $9 million in one-time charges related to an earlier restructuring and an asset impairment. That compares with net income of $24 million for ongoing operations for the same quarter a year ago. Without the one-time charges, the third fiscal quarter net loss was $32 million, compared with net income of $67 million a year ago.

Blaming delays in large enterprise spending, Avaya reported that revenues fell 29 percent to $1.22 billion for the third fiscal quarter from $1.71 billion in the same period a year ago.

While Avayas Chief Financial Officer Garry McGuire said the company has made gains in reducing expenses, it needs to do more. That includes reducing headcount in some parts of the business, he said in a statement. He didnt specify the number of employees to be cut or from where.

Avaya also will be eliminating certain real estate holdings and reducing IT-related expenses. Because of the restructuring, Avaya is expecting to take a charge of between $150 million and $250 million for the fourth fiscal quarter.

"These actions are designed to enhance liquidity and drive additional efficiencies in the business," McGuire said in the statement.

McGuire blamed steeper-than-expected revenue declines for the actions. Revenues across all of Avayas business segments, except for Connectivity Solutions, declined quarter-to-quarter. Overall, they were off 4.7 percent between the second and third fiscal quarters.

"Avayas revenue growth continues to be challenged by constrained IT spending by customers," said Don Peterson, Avayas chairman and CEO, in a statement. "Our large enterprise customers, in particular, delayed purchase in the third quarter."

Avaya also said it is planning to cut the amount it had targeted for capital spending for the fiscal year from $175 million to no more than $125 million.

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