Lucent Punched Post Profit

Lucent Technologies Inc. (NYSE: LU) shares fell more than 8 percent in early afternoon trading today, despite the fact that the equipment giant reported its third consecutive quarter of profitability (see Lucent Reports Q2 Results).

Shares of Lucent fell $0.37 (8.55%) to $3.96 on concerns that the company changed its guidance for operating expenses, which it had been slashing in recent years to correspond with slower carrier spending.

Specifically, executives said Lucent would probably spend about $700 million a quarter on operating expenses in the near-term, and that's up from the guidance last quarter of between $650 million and $675 million. Frank D'Amelio, chief financial officer, said the change was because of increased investments in research and development for next-generation networks and increased employee compensation.

Overall, though, Lucent's earnings appeared solid, even if revenues were down from the year-ago period. The company reported a GAAP profit of $68 million, or 2 cents a diluted share, on revenues of $2.19 billion. This compares with the net loss of $351 million, or 14 cents a diluted share, on revenues of $2.40 billion in the year-ago quarter.

The company improved its cash position as well. As of March 31, 2004, Lucent had $4.6 billion in cash and investments, an increase of more than $300 million from the previous quarter.

"While there is always more to do, we are pleased with the progress we're making," says CEO Pat Russo.

The company says it expects yearly revenues to climb in the low single-digit percent for the fiscal year. Lucent reported yearly revenues of $8.47 billion in 2003. Analysts surveyed by Reuters Research expect Lucent to report earnings of 11 cents a share on revenues of $8.85 billion for fiscal 2004.

Lucent's wireless division received accolades during the quarter, though it hauled in less revenue than it did during the year-ago quarter. Many have their eyes on the company's $525 million agreement with Verizon Wireless, as well as the general increase in data services on wireless networks, as a harbinger of future success (see Verizon Outlines 3G Plans).

Besides two key areas -- worldwide services and optical networking -- Lucent underperformed its year-ago results. And, interestingly, it brought in nearly as much from pension credits ($208 million) during the quarter as it did from sales of optical networking gear ($217 million).

Table 1: Lucent's Q2 Revenues by Segment ($ in millions)
3 Mos. Ended 3/31/2004 3 Mos. Ended 3/31/2003 Year-to-Year Change
Products and Services Revenues
Wireless $951 $1,095 -15%
Voice networking $299 $394 -32%
Data and network management $222 $225 -1%
Optical networking $217 $160 +26%
Services $479 $431 +10%
Other $26 $98 -277%
Total revenues $2,194 $2,403 -10%
Source: Lucent, SEC filings

Lucent also trimmed its headcount down to 32,500 during the quarter, putting another 500 people on the street (see Lucent Purges China Leaders).

With penalties from a shareholder lawsuit and an SEC investigation still hanging around, the company hasn't quite achieved the appearance of a stability. However, at least one analyst speculates that the increased operating expenses could be a positive in disguise (see Lucent Agrees to $25M SEC Penalty).

"That said, the opex increase… may indicate a greater confidence in revenue growth ahead," writes Legg Mason Inc.'s Timm P. Bechter, in a research note issued today.

— Phil Harvey, News Editor, Light Reading

CoolLightGeek 12/5/2012 | 1:59:37 AM
re: Lucent Punched Post Profit So what is LR's analysis?
Here's mine:
1) LU shows another Q profit
2) LU decides to invest more, mostly in R&D
3) Short term profit takers take their short sighted profits hitting stock price
4) LU clearly stronger and moving in right direction
5) CIEN cut 25% of staff to keep its stock price up today.
6) Time for LR to weigh in on whether they continue to view LU as trending in the wrong direction (especially in the business categories that LR is supported to be "expert" in)

I guess I should be happy that LR didn't again try to show that this Qs results were all sleight of hand. Is LR actually considering viewing LU fundamentals as "real"? Now that would be a real LULU.


BenGrahamMan 12/5/2012 | 1:59:30 AM
re: Lucent Punched Post Profit earnings were fair. revenues were down 2.9% from last quarter.

net income benefitted from previous accruals for restructuring and from tax benefit, and if i am not mistaken pension credit. Hence earnings per share are skeptical.

gross margin was nice, but dso of a/r slipped a bit (with an increase of dso's), as did inventory turns. sg&A benefitted from recapture of some bad debts, net , net, looks like operationally lucy lost money again. as i see it, they havent had a profit in 3 to 4 years. accounting gave em profits the last few quarters. I havent even brought out what the effect of stock option compensation would cause.

>> Makes no sense to me but Wall Street rarely makes sense. <<

how should wall street price a company that has recurring legal problems with major governments. how should wall street value a company that has reduced workforce by 2/3s, how should wall street value a company that has less than 5% officer and director ownership.

with all that said, lots of info and i havent disseminated like i usually do.

peace you all,


ps. feel free to cut and paste on raging bull, but please include this comment. "to all the asshole censors at raging bull, go fuck yourselves"
hyperunner 12/5/2012 | 1:59:24 AM
re: Lucent Punched Post Profit Hi pdt,
You have to remember that CoolLightGeek is a Lucent employee. The folks inside Lucent are the only ones who think Lucent's recovery is sustainable - at least on the evidence I've seen to date :-)


pdt 12/5/2012 | 1:59:24 AM
re: Lucent Punched Post Profit coollightgeek - you are right if you say "sleight of hand". in last 3Q we see monies from pension, then selling corning shares and now again pension.

each amount was not insignifcant-but as large as division revenus.

how will lucent make profit next Q or the one after? when do they run out of tricks? will they have revenus from products to take over from revenus from trick :-)
hyperunner 12/5/2012 | 1:59:23 AM
re: Lucent Punched Post Profit Frank D'Amelio, chief financial officer, said the change was because of increased investments in research and development for next-generation networks and increased employee compensation.

(emphasis supplied)

Hmmm. Wonder how much of that went to the top execs? But wait, it's here...http://www.lightreading.com/document....

Now I'm no bean counter so I don't know how to factor in the stock awards to these folks. But the salarries and bonuses alone make up about half of that $25M over-spend - ON JUST THE TOP 5 EXECUTIVES! Holy cow, these people better be worth it.


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