China, Wireless Save Lucent

Thanks to growth in its mobility division, specifically its CDMA wireless networking business in China, Lucent Technologies Inc. (NYSE: LU) continues its battle back to profitability in the first fiscal quarter of 2004, as the company announced improved profits and revenues from the prior quarter (see Lucent's Back in Black).

Lucent logged net earnings of $338 million, or 7 cents per share. After subtracting 4 cents in one-time gains, the company had earnings of 3 cents per share, beating expectations of breakeven results, according to Reuters Research. The company logged $2.26 billion in revenue, up 11 percent from the fourth fiscal quarter of 2003.

Much of the earnings came from special gains, including the sale of securities. In the company's conference call, Lucent CFO Frank D'Amelio said these gains included the sale of shares of Corning Inc. (NYSE: GLW) that Lucent received when it sold its optical fiber business. Corning shares have doubled in the last month.

The bulk of Lucent's growth was in Chinese markets, especially in wireless networks, according to Lucent executives. Chairman and CEO Pat Russo said the growth came from building CDMA networks in China and new contracts with China Unicom Ltd.

Revenues in Lucent’s Mobility division increased 51 percent in the first quarter, totaling $960 million.

But what China giveth, China taketh away. D'Amelio said that wireline business declined overall because of a slowdown in international network buildouts, especially in China.

In the U.S. and data networking markets, growth was mostly flat. Lucent’s Integrated Network Solutions (INS) division had revenues of $790 million, down 8 percent compared to the prior quarter. There was an 18 percent decrease in non-U.S. revenues, and U.S. revenues increased 3 percent.

Russo cited an improved business climate but was conservative in her outlook for the future.

“The market clearly is stabilizing. While we are cautious, we remain encouraged,” she said. "While we have yet to see the evidence of overall capex budgets being raised, we are seeing investment.”

Lucent did not provide financial guidance for the second quarter of 2004, but the company expects to be profitable for the full year 2004, with revenues remaining "flat."

Russo cited the mobile data, metro optical, and VOIP markets as showing potential of growth for the company.

“We see VOIP as a major long-term opportunity. The migration process has begun. VOIP solutions are varied right now, as we work with our customers."

In responding to questions about Lucent's relationship with Juniper Networks Inc. (Nasdaq: JNPR) , Russo described the partnership as "comprehensive" and extending beyond a reseller agreement: "Our relationship with Juniper is far more than an OEM relationship. It involves us evolving our customer networks into MPLS."

Lucent's deal with Juniper was key in winning some large Chinese service providers this quarter (see China Deals Brighten Lucent's Day).

Lehman Brothers analyst Steve Levy called the quarter “very positive,” in a research note published this morning. He notes, though, that he is concerned about the company’s negative operating cash flow.

Levy did not change his rating on Lucent shares. Lehman rates Lucent an Overweight, it’s highest rating, and gives the stock a price target of $4.50.

Shares of Lucent were down $0.21 (4.42%) to $4.54 in midmorning trading on Wednesday.

— R. Scott Raynovich, US Editor, Light Reading

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zoinks! 12/5/2012 | 2:39:11 AM
re: China, Wireless Save Lucent Numbers like these boggle my mind ... $2.6 billion in revenue per quarter and "only" $338M net. It all seems so unreal.


sjd6 12/5/2012 | 2:39:08 AM
re: China, Wireless Save Lucent GÇ£We see VOIP as a major long-term opportunity"

Too bad LU canned their new voip products in 02.
Brilliant planning.
jgh 12/5/2012 | 2:39:08 AM
re: China, Wireless Save Lucent Since Lucent appears to making most of thier earnings in China, maybe UT Starcom should buy them
UT Starcom is a better run company with real R&D going on.
Belzebutt 12/5/2012 | 2:39:07 AM
re: China, Wireless Save Lucent "Our relationship with Juniper is far more than an OEM relationship. It involves us evolving our customer networks into MPLS."

So after Lucent moves their customers to a Juniper MPLS core, then what are they going to do? Live off service contracts for Juniper routers?
reoptic 12/5/2012 | 2:39:06 AM
re: China, Wireless Save Lucent Pat once came up to Massachusetts a few years ago and was asked about Lucent's plans for MPLS. She answered 'I don't know what MPLS stands for and frankly I don't care.' This inspired the crowd of around 1000 engineers. Now it is the key to her success...wonder if she knows what it stands for now?
truelight 12/5/2012 | 2:38:43 AM
re: China, Wireless Save Lucent jgh come and let's get real. You really must work for UTS or are a dislocated ascend person. They have a better run R&D maybe but only if you speak speak Chinese.

UTS still has to prove itself. Its gear is cheap but it has yet to come anywhere close to matching Lucent of old (does not apply to the new Lucent tho).

Just because a company sells a lot of stuff to third world countries on the cheap and is protected and supported by the Chinese govt.....

Let's see some 'real' innovation out of UTS not acquired (PAS) and OEM'ed equipment. I like the stock price tho ;-)

BobbyMax 12/5/2012 | 2:38:42 AM
re: China, Wireless Save Lucent There is nothing in the world that can save Lucent. In the last two years the company has not produced any product.

All Lucent's product are under attack. Even very small and insignificant companies like Aqua and many insignificant softswitch vendors have sought to dismantle #5ESS. This product could have been saved, but Lucent did not have any vision and leadership. It is the courage of these vendors that is troublesome.

"Dr." Armstrong took the wrong initiative of destroying AT&T. He did not know how to create a strong company and supervise it. But Armstrong coming from a very small company did not have the expertise in AT&T's business. He themn made further mistake of appointing Scacht as President and CEO of Lucent. Lucent was largely unsupervised company until the present time. The decay of Bell Labs started when they appointed an East Indian guy (I forget the name) as President of Bell Labs. During his tenure Bell Labs saw the ground zero. There was no product planning and no plans to keep its workers busy. Soon after Lucents workforce swellwed to 170,000 workers. They also acquired a lot of junky companies with no good technology and products. What is mind boggling is that Lucent did not put its technical staff members were not asked to evaluate the companies that were being targeted by Lucent for acquisition.

Over 30% of Lucent's workforce was composed of workers from Third World countries. They even opened a research center in India from which Lucent anything.

Lucent failed to develop relationship with RBOCs, AT&T, MCI, and Spirint, etc.

Even bread and butter issues such as Digital Loop Carrier was ignored. Lucent has nothing to support broadband. There is nothing on the next generation of SONET/SDH products.

There was more emphasis on affirmative action than the companies real business.

Mrs. Russo has not accomplished much. She has not been able to improve relations with RBOCs.
jgh 12/5/2012 | 2:38:34 AM
re: China, Wireless Save Lucent It was a joke!
However, what is happening in the telecom industry and the possibility of a company like Ma Bell being acquired, anything is possible.
Remember, it was only a year ago that Lucent was in play and talks of bankruptcy swirled around it.
TJLeach 12/5/2012 | 2:38:33 AM
re: China, Wireless Save Lucent Lucent has been absolutely cueless over the last three years. Nortel took just as hard a hit as Lucent by cutting jobs and killing projects. Nortel doubled its R&D budget, during the downturn, in areas like VOIP and coming up with Softswitch products that convinced Verizon to spend potential $1.5 billion. Lucent kill many project that didn't have immediate payoffs now the a turn around in telecom spending is at hand the question is. Does Lucent have enough in- house talent come up with a comprehensive net-gen strategy for VOIP?
truelight 12/5/2012 | 2:38:22 AM
re: China, Wireless Save Lucent So we are clear its the Lucent Executive management that are Clueless.

The talent is available but the problems is the management.
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