NEW YORK (CNNMoney.com) -- Lehman Brothers suffered its worst quarterly loss since going public, reporting a loss of nearly $4 billion Wednesday, and announced a series of drastic steps aimed at reviving the beleaguered firm.

Among those changes were plans by the firm to spin-off part of its commercial real estate assets, sell a majority stake of its investment management division and slash its annual dividend.

Following a wild market session Tuesday in which Lehman (LEH, Fortune 500) shares plunged 45% to their lowest levels in nearly a decade, the investment bank said it lost $3.9 billion during the fiscal third-quarter, or $5.92 a share.

The results, which were released more than a week in advance to help quell fears about the firm's underlying health, were the company's second consecutive loss and exceeded Lehman's $2.8 billion second-quarter loss announced in June.

Lehman Chairman and CEO Richard Fuld Jr. described the quarter as "one of the toughest periods" in the 158-year old firm's history.

Just a year ago, Lehman Brothers, along with the rest of the broader banking industry were in the early days of the credit crisis. In last year's third quarter, Lehman reported a profit of $870 million, or $1.54 a share.

Analysts were bracing for bad numbers from Lehman, as well as its crosstown rivals Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500), due to sluggish investment banking activity and weakness in stock markets around the globe. But Wednesday's results surpassed those expectations as consensus estimates anticipated the firm to report a $1.99 billion loss, or $3.35 a share, according to Thomson Reuters.

Lehman shares, which have plunged nearly 88% so far this year, fell nearly 3% Wednesday morning.

A smaller and 'de-risked' Lehman

While sluggish investment banking activity and $7.8 billion worth of writedowns weighed on the company's results, top Lehman execs, including Fuld, blamed the abysmal quarterly numbers on the attempts to shore up the company's books.

During the quarter, the company said it drastically slimmed down both its commercial and residential real estate holdings by selling billions of dollars worth of assets as part of the multi-prong restructuring plan announced Wednesday.

Lehman said it reduced its residential real estate holdings by nearly a half. Part of that included the planned sale of about $4 billion worth of U.K. residential real estate. Lehman said it was working with asset manager BlackRock (BLK, Fortune 500) on the sale and expected it to be completed in the coming weeks.

Similarly, the Wall Street firm announced it would spin off the majority of the company's commercial real estate assets into a new, separate public company dubbed Real Estate Investments Global as part of an effort to "derisk" the balance sheet, Fuld said.

While a deal had not been finalized, the company added that it planned to sell a majority interest in its investment management division, which includes the profitable money manager Neuberger Berman. Lehman said it was in advanced discussions with a number of potential partners and that it expected to announce details of the deal "in due course."

Speculation about a break-up of Lehman have persisted in recent months, including talk that the company would shed its profitable Neuberger Berman money management unit to raise cash.

Also, in an effort to save $450 million, Lehman said it planned to reduce its annual dividend to 5 cents per share from 68 cents.

"Lehman is being forced to make hard decisions now that the various options on the table have narrowed and balance sheet concerns start to bite," Cubillas Ding, a senior analyst with with financial research firm Celent, wrote in a research note Wednesday.

Putting the rumor mill to rest

The fate of Lehman Brothers has been the subject of much market discussion in recent months following the near collapse of Bear Stearns, which was subsequently sold to JPMorgan Chase (JPM, Fortune 500) at a fire sale price.

On Tuesday, Lehman shares plummeted following a report by Dow Jones that indicated talks between Lehman and Korea Development Bank had ended. It had been widely speculated in recent weeks that the state-run KDB was interested in buying a stake in Lehman.

The stock fell even further Tuesday after credit ratings agency Standard & Poor's said it was placing Lehman on its CreditWatch list with negative implications, suggesting that S&P may cut its rating on Lehman's debt.

Lehman's problems have proven more acute than some of its peers as a result of bad investments in the U.S. commercial and mortgage market such as the apartment developer Archstone.

In June, following the company's first loss, Lehman silenced many of those critics by announcing plans to raise $6 billion in capital by selling stock.

At that time, investors were not only questioning the company's accounting but speculating that Lehman may have to sell part or even all of itself to another financial firm.

But some of that speculation persisted in the months that followed. Most recently, there have been news reports that other large global financial institutions besides KDB were eyeing an investment in the U.S. firm, including Tokyo Mitsubishi Bank as well as a group of investors led by the British bank HSBC (HBC).

Lehman chief Fuld told analysts on a conference call Wednesday that he would bring any attractive proposition to the company's directors provided it offered a compelling value for shareholders.

Fuld, who has faced increasing pressure to take action amid all the uncertainty about the firm's future, said such speculation and the intense public scrutiny the company has faced in recent weeks has caused "significant distractions" to not only clients and counterparties but employees as well.

But he was quick to point out that morale at the firm remained strong and that employee turnover was nothing "abnormal." He added that Lehman's board continued to be supportive.

"We have a long track record of pulling together when times are tough," he said. "We are on the right track to put these last two quarters behind us."