[Fair Use: For Educational/Research Purposes Only]

Link

Jan 21, 2000 - 12:05 AM

Lucent's Profit Drops 23 Percent, Missing Wall Street's Deflated Forecasts

The Associated Press

MURRAY HILL, N.J. (AP) - Communications equipment maker Lucent Technologies saw quarterly profits plunge 23 percent for 1999's last three months, narrowly missing Wall Street forecasts that were already slashed after a warning two weeks ago. Operating income for the former division of AT&T totaled $1.18 billion, or 36 cents per share, during the three months ended Dec. 31, which is the first quarter of Lucent's fiscal year.

Those figures, reported Thursday, don't reflect certain one-time gains and expenses unrelated to Lucent's core business that gave the company a net profit of $1.25 billion, or 38 cents a share, for the quarter.

In the same period in 1998, Lucent earned $1.52 billion, or 48 cents a share, also excluding one-time events.

Revenues for the quarter edged higher to $9.9 billion from $9.8 billion a year earlier.

The operating profit was at the lower end of the range suggested in Lucent's warning on Jan. 6. Analysts, most of whom were caught off guard by that announcement, had reduced their forecasts to about 37 cents a share, according to a survey by First Call/Thomson Financial.

On Thursday, Lucent offered the same explanation for its disappointing results: weak software revenues, customer delays in deploying network equipment, and Lucent's inability to keep up with demand for its fast new fiber-optic gear.

"Lucent left the front door open for their competitors to walk right through, and Nortel and Ciena took advantage," said David Powers, senior technology analyst at Edward Jones in St. Louis, referring to two of Lucent's top rivals in developing fiber-optic gear to speed up the flow of voice and data traffic on the Internet and other networks.

Powers said the earnings report was mostly in line with Lucent's Jan. 6 forecast, although the company's gross profit margin came in slightly lower than he expected - down 11 percent to $4.65 million.

"Lucent was a company that was cruising right along, beating (Wall) Street estimates ever since they were spun off from AT&T, and now they've hit a speed bump," Powers said. He predicted Lucent would need a few quarters to get back on track, but said "the company is well positioned to benefit from the tremendous growth in the telecommunications equipment market."

Several class-action shareholder lawsuits were filed after the Jan. 6 warning, charging that Lucent had misled investors.

Despite the weak showing, Lucent noted that the quarter was still the three-year-old company's second largest ever both in revenue and net income. That's because the October-December quarter typically is Lucent's biggest.

Richard McGinn, chairman and chief executive officer, reiterated that the company expects to solve its manufacturing and shipment problems by the end of the current quarter, and also anticipates that network deployments delayed from the first quarter will occur later in the fiscal year.

"The fundamental needs of our customers continue to grow, and we intend to capitalize on this demand as we've done in the past," McGinn said.

-- snooze button (alarmclock_2000@yahoo.com), January 21, 2000

Answers

Their stock will probably go through the roof now. Worked great for Amazon!

-- Gia (laureltree7@hotmail.com), January 21, 2000.

The ever-popular Amazon (AMZN) has been trading in a big ol' 52-week range of 41-113. Was at 41 in Feb'99, up to 111 in Apr'99, down to around 41 in Aug'99, up to 113 in Dec'99, and now it's sinking again (at 64 today).

Talk about volatile - ya get queasy just looking at the chart. Comes from no one really having Clue 1 whether the company's ever going to make money or not...

-- DeeEmBee (macbeth1@pacbell.net), January 21, 2000.

A little bit of inside comment from a friend at Lucent:

"We think maybe we're going to make through the rollover, but we're not too sure about our customers."

-- snooze button (alarmclock_2000@yahoo.com), January 21, 2000.