Lucent Posts Q4

MURRAY HILL, N.J. -- Lucent Technologies (NYSE: LU - News) today reported results for the fourth quarter and fiscal year 2005, which ended Sept. 30, 2005, in accordance with U.S. generally accepted accounting principles (GAAP). For the quarter, Lucent reported net income of $374 million or 8 cents per diluted share. These results compare with net income of $372 million or 7 cents per diluted share in the third quarter of fiscal 2005, and net income of $1.21 billion or 23 cents per diluted share in the year-ago quarter.

The company reported revenues of $2.43 billion in the quarter, an increase of 4 percent sequentially and an increase of 1 percent from the year-ago quarter. The company's revenues were $2.34 billion in the third quarter of fiscal 2005 and $2.40 billion in the year-ago quarter.

The fourth quarter's earnings per share included the positive impact of $107 million, or about 2 cents per diluted share, primarily due to income tax items. Tax items and certain other significant items had positive impacts of $127 million, or about 2 cents per diluted share, in the third fiscal quarter, and $1.00 billion, or about 19 cents per diluted share, in the year-ago quarter, which included $861 million, or about 16 cents per diluted share, for an income tax benefit related to a significant tax refund claim.(1)

For the fiscal year, Lucent reported revenues of $9.44 billion, an increase of 4 percent compared with $9.05 billion in revenues for fiscal 2004. The net income for fiscal 2005 was $1.19 billion or 24 cents per diluted share, compared with net income of $2.01 billion or 42 cents per diluted share for fiscal 2004, which included, among other items, the aforementioned $861 million income tax benefit.(1)

EXECUTIVE COMMENTARY

"Lucent delivered another solid performance in fiscal 2005. We posted our second consecutive year of profitability, grew our revenues 4.4 percent and have firmly established ourselves as a leader in the race for next-generation networks based on the IMS architecture," said Lucent Technologies Chairman and CEO Patricia Russo. "We have been making steady progress in the areas we have targeted for growth, such as IMS, 3G mobile networks, services and next-gen access and optical. During the fiscal year, we announced contract wins for our IMS-based solutions and portfolio with Sprint in the U.S., O2 and Netia in Europe and Shandong Unicom in China. And just last week, we announced comprehensive, multiyear IMS contracts with Cingular and SBC to further strengthen our position in next-gen networks," said Russo.

"In addition, in fiscal 2005, we announced our first commercial UMTS deployment in North America with Cingular, and we currently have 16 commercial CDMA2000® 1xEV-DO customers," said Russo. "Last week, we unveiled the Lucent Multimedia Access Platform further enhancing our broadband access product portfolio. This is one of the industry's first products to support digital subscriber line services, fiber to the home or premises and WiMax wireless broadband in an integrated platform.

"We continued to expand our revenue base by growing our Services business 10 percent in fiscal 2005, with strong growth in government contracts, and we're getting traction in the growing managed services and hosted applications spaces," said Russo.

Lucent Technologies Chief Financial Officer Frank D'Amelio said, "We continued to grow our revenues and generate profitable results in 2005, while continuing to invest in the business. At this point, we expect Lucent's annual revenues for fiscal 2006 to increase on a percentage basis in the mid- single digits. As always, we continue to focus on improving our productivity and managing our cost and expenses, while we build on new revenue and market opportunities for the business."

GROSS MARGIN AND OPERATING EXPENSES

Gross margin for the fourth quarter of fiscal 2005 was 46 percent of revenues as compared with 45 percent in the third quarter of fiscal 2005 and 41 percent in the year-ago quarter. For the fiscal year, gross margin was 44 percent of revenues as compared with 42 percent for fiscal year 2004.

Operating expenses for the fourth quarter of fiscal 2005 were $776 million as compared with $681 million for the third quarter of fiscal 2005 and $691 million in the year-ago quarter. For the fiscal year, operating expenses were $2.83 billion as compared with $2.56 billion for fiscal year 2004.

BALANCE SHEET UPDATE

As of Sept. 30, 2005, Lucent had $4.93 billion in cash and marketable securities, which represents an increase of $794 million from the quarter ended June 30, 2005. The increase was primarily driven by a $902 million income tax refund, and partially offset by $128 million for the repurchase of certain debt obligations.

Lucent Technologies Inc.