Lucent Stock Basis

An explanation of the tax implications for AT&T shareowners as the outcome of the Lucent Technologies spin-off. In November, they informed us they intend to outsource a lot of manufacturing work—there will be no layoffs since there is 17 percent attrition per year, but this will mean a reeducation of this a lot of CWA jobs. Workers feel betrayed, particularly since the business is performing well and they see the leading men and women at Lucent performing quite well.

Lucent is a technology-driven firm that competes with new and smaller firms that concentrate on building and packaging new technologies and outsourcing manufacturing to low-expense, non-union producers. It is behind its important competitor in the emerging information networking technologies that will dominate domestic markets in the future but continues to sell large quantities of the voice networking switches (5E switch), which have served as the company’s most significant supply of cash flow.

Lucent also inherits a bureaucratic culture and is attempting to shift to a technology-driven, innovative culture. Nonetheless, the need to have to attract and retain the “knowledge workers” who are crucial to the improvement and use of emerging technologies serves as a robust incentive for the business to develop and maintain a culture and comprehensive set of HR practices that respond to the demands and interests of this segment of the workforce. Lucent has an aged unionized workforce focused in manufacturing (IBEW) and in installation and service (CWA). In truth, we’ve been sharing some of our anxiousness about Lucent in the Rule Maker Portfolio and on The Motley Fool Radio Show for months.

How employment trends eventually play out is likely to be a function of the net effects of efforts to develop the business, outsource commodity elements, and concentrate on higher worth-added perform and technologies. It really is secure to say that Lucent has its hand in virtually each honey pot of the telecom world, but its specialty is in old-world circuit-switched voice networks, the stuff of its heritage with Ma Bell pre-1996.

If this path is followed, an crucial question is no matter whether the deterioration in the labor-management relations that is bound to take place will lead to further conflict or price problems, given that the unions representing Lucent staff will shed substantial membership under this scenario. A second option is that the restructuring of manufacturing about high worth-added perform that reflects the company’s core competencies, along with market growth, will make up for the jobs lost by outsourcing decrease skilled work to outside companies.