Lumen looks to lower costs through job cuts as cash concerns continue

By Bill Peters and Emily Bary

Telecom company expects to incur severance and related costs of up to $100 million

Faced with growth and cash challenges, Lumen Technologies Inc. is looking to cut expenses by reducing its headcount.

The telecom and networking company on Tuesday said it would reduce its staff by less than 7% through layoffs and voluntary separations. Lumen (LUMN) said in a regulatory filing that the move was part of a cost-cutting effort expected to be largely completed by the end of the second quarter.

The plans for the cuts were finalized on April 19, Lumen said, adding that it expects to incur severance and related costs of around $90 million to $100 million, mainly in the second quarter.

The company's shares were up 1.5% in after-hours trading Tuesday.

Lumen, formerly known as CenturyLink, has struggled recently due to challenges in its legacy businesses and pressures on the business-wireline market. Shares are off 87% over a two-year basis.

"We maintain a healthy degree of skepticism regarding Lumen's ability to execute a meaningful, sustainable turnaround over the coming years, particularly with the market in which it operates and of which it's a larger player [being] so unhealthy," MoffettNathanson analyst Nick Del Deo wrote in a note to clients last week.

Del Deo added that he was willing to "give the company some credit forimprovements in underlying trends, but they're insufficient to support a target price in excess of where the shares trade, in our view, even with the breathing room that its recently completed debt restructuring offers."

Prior to a deal with creditors that was announced earlier this year, Lumen's chief financial officer warned that the company's large "debt tower of 2027" was making investors wonder whether it even mattered whether Lumen succeeded with its efforts to turn the business around.

Gimme Credit analyst Dave Novosel wrote in February that while the debt exchange "definitely enhances the company's liquidity," Lumen was still on a path of minimal cash flow.

"Management has indicated it would be willing to consider the sale of other assets to provide more cash for the business," he wrote at the time. "However, Lumen would likely target assets with minimal growth opportunities, and one has to wonder how attractive those assets would be to potential buyers."

-Bill Peters -Emily Bary

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04-23-24 1755ET

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