This to me was very comforting set of numbers. It shows that even in a very negative telecom equipment market they can hold their own

Steve Levy, Lehman Brothers

The bulk of its massive $8.8bn third quarter loss is down to one-off restructuring costs.

By next year Lucent will have laid off half of its staff as it battles to cope with a slowing market and its own past mistakes in product development.

Rivals Nortel and JDS Uniphase have also been hammered by the slowdown in demand for fibre optics and other telecoms equipment.

The market has also been affected by the aftermath of the 11 September terrorist attack.

Analyst reaction

Lucent reported a third quarter loss of $8.8bn, on sales of $5.2bn, including an $8bn one-off charge.

That compared to losses of $484m in the same quarter last year, on sales of $7.2bn.

Analysts had mixed views on Lucent's prospects, although some were encouraged by the way the company appeared to be coping with the downturn.

Steve Levy, of Lehman Brothers, said: "This to me was very comforting set of numbers.

"It shows that even in a very negative telecom equipment market they can hold their own."

The results come on the first anniversary of Henry Schacht's arrival as chairman and chief executive.

Mr Schacht was drafted in to implement a radical cost-cutting programme, streamlining product ranges and axing jobs in an effort to turn the company around.

He said Lucent was still on course to return to profitability, despite the events of 11 September, which had

"All along we've said fiscal 2001 would be a rebuilding year for Lucent," Mr Schacht said.

AT&T

Meanwhile America's biggest long distance phone operator AT&T reported a big drop in quarterly profits.

The company blamed the 11 September terror attacks and a weakening economy.

Profits, before tax and charges, will be between $3.4bn and $3.6bn, the company said.

But $400m would be written off because of poor performance at its troubled high-speed internet service provider Excite At Home.

Income from long distance voice calls was also down.