Optical/IP Networks

Lucent Restructuring: Mixed Bag

As Lucent Technologies Inc. (NYSE: LU) works hard to restructure itself, most analysts are adopting a "wait and see" attitude.

What's going on at Lucent Technologies Inc. (NYSE: LU) this week? Lots.

Lucent's on track to get the cash it needs to continue its immediate operations. As part of the revitalization program announced by CEO Henry Schacht in January (see Lucent Loses $1 Billion, Plans Big Layoff), the company's been negotiating with various financial institutions to obtain $4.5 billion in short-term credit and about $2 billion in a five-year, revolving line of credit. With a deadline of February 22 looming for renewal of a huge portion of this credit, Lucent's been under pressure.

But progress has been made, the company says. And according to a report in yesterday's Wall Street Journal, several banks, including Bank of America Corp., Bank One Corp., and Mellon Financial Corp. seem ready to help out. J.P. Morgan Chase & Co. were already in on the deal. "We're continuing to have productive discussions [with banks] and we are optimistic about a positive outcome," a spokeswoman told Light Reading today.

Also on the good-news front, Schacht is said to have reassured an aggressive band of shareholders at their annual meeting in Florida this week that the company was in shape to get back on track as planned.

Among other things, Schacht is reported to have told the group of about 600 that Lucent planned to be "more judicious" about its vendor financing. At present, Lucent has extended about $5.7 billion in credit to various customers, of which $1.8 billion has been drawn against.

Lucent is negotiating to extend about $1.6 billion more in credit. But executives say the company will be cautious with this "limited resource" in the future, extending credit only to companies in emerging markets, such as 3G wireless and optical networking.

Lucent also made the rumor mill this week, when the Wall Street Journal reported this morning that it was peddling its Optical Fiber Unit, the only unit in which sales grew during the last quarter. Lucent refused to comment on the rumor, as did the two companies cited in the paper as possible buyers, Alcatel SA (NYSE: ALA; Paris: CGEP:PA) and Corning Inc. (NYSE: GLW).

But selling this profitable division would fit Lucent's plan to review its portfolio of divisions. Lucent reportedly shares nearly half of the total fiber cable industry worldwide with Corning -- a market that reached about $2.7 billion in revenues worldwide in 2000 and is slated to grow 30 percent this year, according to KMI Corp.

Some analysts are skeptical that Lucent would be able to sell its Optical Fiber Unit to Corning. "It's a stretch. I think Corning might be blocked by DOJ from an acquisition like that," says analyst Mark Langley of Epoch Partners. There are also a slew of other high-flying fiber companies that might be interested, including Furukawa Electric Co. Ltd. and Hitachi Ltd. (NYSE: HIT; Paris: PHA).

-- Mary Jander, senior editor, Light Reading http://www.lightreading.com

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