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Can Lucent Make It?

Light Reading
News Analysis
Light Reading
1/22/2002

Executives at Lucent Technologies Inc. (NYSE: LU) say the company's on track to profitability in 2002 and will start to show the turnaround toward that goal next quarter. The company still showed losses and low gross margin in its quarterly report this morning (see Lucent Reports Q1 Results).

Highlights of today's report include:

  • Revenues down substantially but higher than expected. Pro forma revenues were $3.5 billion for the first fiscal quarter 2002, down 27 percent sequentially but in line with previous guidance of $3.1 to $3.4 billion. Gross margin was 13.7 percent.
  • Loss per share reduced. Loss per share from continuing operations is 23 cents, compared with 28 cents last quarter. This figure also is in line with Lucent's guidance, which was for a loss of 23 to 26 cents per share.
  • Low revenues inside and outside U.S. There is now no clear hope of improving revenues by shifting Lucent's geographical emphasis. The company reported that U.S. revenues were down 26 percent sequentially to $2.2 billion for the quarter, and international revenues were down 29 percent, to $1.3 billion.
  • Agere spinoff is "on." CFO Frank D'Amelio said Lucent's on track to spin off Agere Systems (NYSE: AGR) and will base the valuation on next quarter's financials. In the event those financials preclude a spinoff, D'Amelio says he's confident of getting an extension from the U.S. Internal Revenue Service. He says the company's already looked into this.
  • More layoffs. Lucent's already reduced its workforce by about 58 percent since restructuring began last year, reaching an employee census of 62,000. Now, it says it's in line to lose another 7,000 by June 2002. Lucent says this isn't new, that at least 5,000 jobs already were counted in its Phase II restructuring plan announced in July 2001, and that 2,000 will probably come about naturally through attrition and as additional plants are closed.
  • New products. This quarter, Lucent plans to roll out its new LambdaUnite and LambdaXtreme optical products (see Lucent Unveils Product Lineup). And it's set to announce new customers within the next couple of weeks for the LambdaRouter, execs said.

In a conference call with Wall Street analysts this morning, Lucent execs maintained an upbeat tone despite questions about just how the company will make profitability this year. They said the company plans 10 to 15 percent sequential revenue growth for next quarter, as well as gross margin in the 35 percent range. They say "improvements to the income statement, expense line items, and provisions for bad debt and vendor financing" would result in the desired changes in revenue and gross margin.

At least one analyst, though, says Lucent apparently has cards up its sleeve it's not yet willing to show. Otherwise, even allowing for generous gross margin improvements, the spinoff of Agere, and revenue uptick next quarter, the figures just don't add up to profitability by year's end.

"I'm going over the numbers with them again, but realistically, they must have a couple more divestitures or plant sales [than what they've mentioned already]," says Steve Kamman of CIBC World Markets.

What will be sold? Kamman isn't willing to venture a guess. But Lucent management seems confident that whatever it plans will do the trick -- and show evident change by next quarter.

Apparently, Wall Street's confident the change will come. This afternoon, Lucent shares were trading at $6.87, up 0.18 (2.69%).

Interestingly, despite stating that optical networking lost the most money of any Lucent product area last quarter, execs insist it's among the key areas of focus. In her opening remarks, new CEO Patricia Russo mentioned "optical data and wireless" as strategic products for Lucent (see Lucent Stands Pat and Pat Russo)

"While customers confirm that spending is down, they also confirm that they want and need help... in defining a path to next-generation networks, while creating and offering profitable new services at lower cost," said Russo

In closing remarks, chairman Henry Schacht reiterated the certainty that the company will make its target. "Can we do it this quarter? Stay tuned."

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com
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johnjohn
johnjohn
12/4/2012 | 11:02:37 PM
re: Can Lucent Make It?
I believe the next-gen product line (Lambda) that is still not available will pay dividends as the market rebounds later this year.
let-there-be-light
let-there-be-light
12/4/2012 | 11:02:36 PM
re: Can Lucent Make It?
as long as Pattie doesn't get too involved in any key business decisions. I heard she was the major force behing the disastrous Chromatis acquisition..

Sometimes I wonder what I'm doing wrong, career-wise....Why can't I be CEO, too?!??!
melao
melao
12/4/2012 | 11:02:30 PM
re: Can Lucent Make It?
"as long as Pattie doesn't get too involved in any key business decisions. I heard she was the major force behing the disastrous Chromatis acquisition..

Sometimes I wonder what I'm doing wrong, career-wise....Why can't I be CEO, too?!??!"

You gotta get to know the right people at the right time, and promote yourself to them. :)

That-¦s my guess...
BenGrahamMan
BenGrahamMan
12/4/2012 | 11:02:26 PM
re: Can Lucent Make It?
Here are some notes I compiled from today. Sorry to link you to a site, but I thought this is the best way to supply the notes. Look at the Lucent folder.



http://briefcase.yahoo.com/rbc...

If you have difficulty accessing the site, just email me either via this board or at [email protected]

peace,

bgm
HarveyMudd
HarveyMudd
12/4/2012 | 11:02:12 PM
re: Can Lucent Make It?
Lucent's annual report is out and is clear indicator of future performance.


Ther company is so battered and it had so many bad decisions that it would be almost impossible to recover from its monumental errors.

The Pro forma revenue is no indicator for the future first quarter 2002 income. It should also reminded if Lucernt expects to make $14.00 Billion per year, it can only support a maximum of 30,000 personnel. Given the current politics, it is not expected that Lucent can achieve this level of reduction in the workforce.

Bell Labs has been completely during the last 15 years or so. Bell Labs had the best personnel in the world. But the management destroyed the company because of its affirmative action and over dependence on the contract workers from third world contries. It would take another 15 years to change Bell Labs, provided that there is a desire to do so.

Agere is equally weak organization. It would very difficult for Agere to survive in the current environment. It would be very difficult for Agere to survive the market place unless it replaces sales and marketing personnel.

If Lucent has a desire to trim its workforce to 62,000 personnel, it must produce a revenue of $35-to-$40 Billion. I do not believe Lucent would be able to meet this revenue figure.

Let us not forget Lucent Stock came down yo $6.00 all the way down from a high of $79.00. A lot people including many Lucent employees bought Lucent's share when it was trading at $79.00 per share.

Lucent lost money on all companies it acquired. Due to these acquistions Lucent has lost close to $120.00 Billion. Lucent forgot for a moment that what it can do, no other company in the world can duplicate it except Nortel.

Where was Pat Russo when a decision was made by Lucent to acquire Ascend Communications. She would have to answer this question to the employees and shareholders.
Belzebutt
Belzebutt
12/4/2012 | 11:02:02 PM
re: Can Lucent Make It?
Harvey, is there any company in this industry that you feel positive about? If so, which is it, and why?
sw
sw
12/4/2012 | 11:02:01 PM
re: Can Lucent Make It?

"If Lucent has a desire to trim its workforce to 62,000 personnel, it must produce a revenue of $35-to-$40 Billion."

You asses 600K revenue per person in justifying the 40B revenue requirement. If we take 10% of this as the cost per person, average cost per person is 60K. The assumption that all Lucent employees live in the US is drastically wrong, Lucent has 50% of work force overseas. Do you think an employee in China or India cost lucent 60 K per year ?

This is Heavy Mud guy's
broadbandboy
broadbandboy
12/4/2012 | 11:01:47 PM
re: Can Lucent Make It?
HMudd: "Where was Pat Russo when a decision was made by Lucent to acquire Ascend Communications. She would have to answer this question to the employees and shareholders."

Smartest acquisition they ever made. Problem is they lost all the good people to start ups.

BBboy
Bill Johnson
Bill Johnson
12/4/2012 | 11:01:43 PM
re: Can Lucent Make It?
- "Harvey, is there any company in this industry that you feel positive about? If so, which is it, and why?"

Exactly! Harvey has been touting Lucent and Nortel above all others for the past two years. If he is now bagging on them, who does that leave? The answer is...Harvey; wallowing in his own misery remembering "the good ol' days" when he was employed.

Now he writes smack for LR. Normally this would not be a problem but it is my impression that everyone is just plain tired of hearing his incessant bullshit.
MKTG_Hack
MKTG_Hack
12/4/2012 | 11:01:41 PM
re: Can Lucent Make It?
HARVEY!!! HARVEY!!! Easy does it, son! Put those medications back on the shelf. I already miss the misguided grousing and grumbling!

"The only difference between an optimist and a pessimist is that the pessimist is better informed" -Will Rogers-
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