Lucent Pays Big to Settle Claims

Lucent Technologies Inc. (NYSE: LU) has moved to resolve a raft of longstanding lawsuits, in a milestone settlement reflecting the high price the company has paid for its part in the telecom boom-and-bust.

While admitting no fault, Lucent announced late yesterday that it will pay about $568 million to settle 54 separate lawsuits brought against the company and its officers as its share price collapsed in the wake of the telecom implosion (see Lucent Settles Lawsuits).

The court's final approval of the arrangement and associated red tape could take up to 18 months to resolve.

Lucent will directly pay out a total of about $420 million to various litigants and lawyers to end the multiple claims. Of that amount, about $315 million will consist of cash, stock, or both, while about $100 million will come from a company issue of warrants for the purchase of common stock. Lucent will pay up to $5 million to cover administrative costs related to the settlement. Some of Lucent's insurance carriers will kick in another $148 million to meet the total.

Through separate insurance claims, Lucent hopes to recoup up to $70 million of the $315 million it pays out.

Lucent plans to record a charge of roughly $420 million when it reports its second-quarter 2003 results, unofficially targeted for the week of April 21. The charge could take an additional 11 cents off Lucent's EPS figure. First Call now shows analyst consensus at -$0.09 for the second quarter.

Why must Lucent pay so much? "Clearly, Lucent wanted to avoid the uncertainty of a jury trial," says Steve Levy of Lehman Brothers. "It's one of the most widely held stocks, and it had one of the largest declines in market value... Obviously, advisers said, 'Let's settle, because potential damages could be really sizeable.' "

Lucent's litigants included the likes of Teamsters Local 175 and 505 D&P Pension Trust Fund, headquartered in West Virginia, and the Parnassus Fund and Parnassus Income Trust/Equity Income Fund, based in San Francisco, which could have been multimillion- or even billion-dollar threats to Lucent's stability.

Levy thinks the figure Lucent's paying is high, but not destructively so. "On the surface it looks huge, but if you peel it back... you see the insurance company is paying [a large percentage], that the timing is 18 months, that the bulk of Lucent's payment is in warrants."

As for the one-time charge the company's taking for the settlement, Levy says: "I think they'll look beyond that eleven-cent charge at revenues and whether Lucent's still on track to achieve profitability by September."

Lucent's descent was among the most dramatic ever: At the height of the boom, Levy points out, Lucent soared to a market cap of $280 billion. Today, it's closer to $6 billion.

The settlement is a milestone for Lucent in terms of its image, because it ends a series of high-profile claims against the company. Last month, Lucent closed the book on an investigation of its accounting practices by the U.S. Securities and Exchange Commission (SEC) (see Lucent to Settle With SEC). And earlier this year, the company resolved a dispute with a former employee that had stirred a pot of accusations (see Lucent Puts Aversano Suit to Rest).

In those cases, like this one, Lucent resolved the issues without admission of wrongdoing -- clearly, a win for the company as it seeks to revamp its image and encourage shareholder confidence.

At press time, Lucent shares were trading at $1.52, up $0.04 (2.70%).

— Mary Jander, Senior Editor, Light Reading

BobbyMax 12/5/2012 | 12:21:13 AM
re: Lucent Pays Big to Settle Claims Lucent as a company is gone from the face of the earth. The company has been unable to maintain its products. In addition, the company has not been able to conduct business with the RBOCs and other clecs.

The system of undeserved bonus and stock options is still thriving
Iipoed 12/5/2012 | 12:21:13 AM
re: Lucent Pays Big to Settle Claims Bobbymax, you put these posts out, why? Curious what it is you are trying to say. Your comments are like going to someone's funeral and saying "geez I guess they won't get to have pizza anymore"

Help me out, just trying to understand what specifically are yoou hoping to accomplish by posting gibberish?

Curious if you will even respond to this as I noticed you never respond the all the other attachks.

Actually while writing this I think I have the answer. You are actually the head of Light Reading and merely do this to provoke follow up silly posts such as this to your inane nonsense.

Geez, I am glad I figured this out finally and save the rest of us further dialogue about you.
BobbyMax 12/5/2012 | 12:20:59 AM
re: Lucent Pays Big to Settle Claims Dear "Dr." Lipoed:

I am responding to your request. Let me repeat what I am saying about Lucent. You did not raise any specific questions, but I would attempt to answer hoping that it would provide you with some comfort. I am very busy person and do not have time to respond to every posts.

I am keeping my answer very concise as you seem to know about Lucent.

1. As you are aware that there used to be no company like Bell Labs/Lucent on the earth. All of
a sudden, Lucent lost the vast market share it used to have.

2. The company's share has dropped from $75.00 to
$1.50 per share. As a result of this drop millions of people have been affected. Some have lost every thing they had.

3. If I remember correctly Lucent's annual revenue used to over $35 Billion.

4. Lucent acquired a nunber of useless companies but it did not make any money on these companies. The cost of acquisition was close to $50 Billion dollars.

5. The company was mismanaged at all levels of its operation. Both Schachet ( chairman) and MCGinn were ineffective in shaping up Lucent in terms ofits products and technologies. They did not know anything about the telecom industry. The top management did not have nuch experience in telecommunications

6.Lucent has been abandoned by RBOCs and other carriers.

7. It hired a large of programmers from the third world countries. Its pructivity dropped enormously.

The above description would give you some idea about the nature of difficulties that Lucent faces. It has reduced the workforce from 136,000 to about 35,000 people. But this reduction has not helped Lucent in any form.
ChambuMan 12/5/2012 | 12:20:50 AM
re: Lucent Pays Big to Settle Claims >The above description would give you some idea >about the nature of difficulties that Lucent >faces. It has reduced the workforce from 136,000 >to about 35,000 people. But this reduction has >not helped Lucent in any form.

I like the 7 point assesment of how Lucent screwed up! and the above observation!

To add insult to injury the management team and freak'in Pat Russo took millions of dollars in bonus!......God Bless Corporate America!?!
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