Lucent Dips on Q1 Numbers

What's the scoop on Lucent Technologies Inc.'s (NYSE: LU) fourth-quarter earnings? Not fantastic, but not exactly a disaster either.

Lucent saw its share price dip by 22 cents, to $3.48 from Tuesday's closing price of $3.70, in early trading this morning after it released its first-quarter financials (see Lucent Reports Q1 Financials).

Lucent posted revenues of $2.34 billion, net income of $174 million, and earnings per share (EPS) of 4 cents per share. That EPS met with analyst expectations, but Wall Street had been expecting revenues of $2.41 billion.

In the same quarter a year earlier, Lucent posted revenues of $2.26 billion and a net income of $349 million, while in the fourth quarter of fiscal 2004 (ended September 30, 2004), the vendor recorded revenues of $2.4 billion and a net profit of $1.21 billion.

Last quarter's profit was bumped up by one-off items that totaled more than $1 billion, CFO Frank D'Amelio told a conference call today. In addition, Lucent's now legendary pension credits weren't as high (see Lucent Numbers Raise Pension Question). Net pension credits in the first quarter were $175 million, down from $254 million in the previous period.

That trend is set to continue. D'Amelio noted that total net pension credits in fiscal 2004 were $868 million, and would be about $720 million in fiscal 2005.

Lucent's revenues from its fixed networking division, Integrated Network Services (INS), continue to suffer. Sales there were $645 million, down 7 percent sequentially, and down 18 percent compared with a year earlier.

CEO Pat Russo says sales of legacy gear, such as TDM and ATM switches, are falling faster than sales of new IP and optical systems is growing. "We're focusing our energies on areas where there are growth opportunities," such as VOIP and broadband access, "and working our way through this transition."

But wireless infrastructure sales continue to shore up the firm, accounting for $1.15 billion of the revenues, about flat from the previous quarter but up 19 percent compared with a year earlier. Lucent has won some major deals in the past few months, with more deals in the pipeline (see Deal Solves Nextel 3G Dilemma, Lucent Linked to Cingular Deal, and Lucent Scores $5B Verizon Deal).

Russo said the firm was planning a data-only wireless infrastructure push into GSM territories in the near future to supplement Lucent's initial success in the UMTS market (see MMO2 Preps for HSDPA).

She said Lucent is "working on a data-focused disruptive technology" to sell into UMTS markets, but that the launch was "12 months down the line" (see Russo Promises Disruption).

Revenues from Lucent's services division also remained steady, up 1 percent from the previous quarter at $520 million. "Our focus on multivendor maintenance and professional services is paying off," said CFO D'Amelio.

Gross margins in the first quarter were up a point at 42 percent, compared with the 41 percent achieved a year earlier and in the previous quarter. Operating expenses were $665 million, up from $648 million a year earlier but down from $691 million in the fourth quarter of fiscal 2004.

At the end of the first quarter (December 31, 2004), Lucent had $4.6 billion in cash, down $300 million from three months earlier. That reduction, said the company, was "primarily driven by the payment of the company's fiscal 2004 employee incentive awards." (See Lucent's Fat Cats Get Fatter.)

— Ray Le Maistre, International News Editor, Light Reading

Stevery 12/5/2012 | 3:29:15 AM
re: Lucent Dips on Q1 Numbers Net pension credits in the first quarter were $175 million, down from $254 million in the previous period.

I'm confused.
1. Wasn't LU in the news for having cut pension benefits?

2. Wasn't the reason that the pension plan was short on cash?

3. If the plan was short on cash, do the feds really let you take money out of the plan for your bottom line?

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