Notter Nixes Lucent
The main troubling item in Notter's report is that Lucent generated $685 million in pension income during fiscal 2003, says Notter. Pension income is not cash available to shareholders, Notter explains. Rather, it's an income statement item that shows up anytime the "assumed return on pension fund assets exceeds pension expense." So what? "Without [Lucent's pension income], Lucent is not a profitable company next year -- despite significant operating margin expansion the Street is building into models," Notter writes. In other words, Lucent's most recent profitable quarter -- the first in three years -- was more a product of confused accounting than a sign that the company has righted itself under Pat Russo's guidance (see Lucent's Back in Black). Notter is not the only analyst backing away from Lucent these days. The average analyst rating on Lucent's stock is worse now than it has been in 13 weeks, according to Multex.com. Five analysts have a Sell rating on Lucent, while another 28 either rate it as a Hold or Underperform -- two of the bottom three out of five possible stock rankings. While the company is cutting its retiree benefits quickly, some on Wall Street feel its been carrying the burden of expensive retirement plans for too long. In a recent cross-country tour, former Lucent chairman Henry Schacht complained that Lucent's retiree healthcare benefits cost some $850 million per year (see Lucent Retirees Get the Schacht). Lucent expects about $8 billion to $9 billion in revenue in 2003, and it isn't expected to break even this year. If all that weren't enough, Notter writes that, after a seasonally strong quarter in December, Lucent's prospects look a bit dimmer after the beginning of the year. In his note, Notter puts a $2.00 price target on Lucent's shares. In early afternoon trading on Friday, Lucent was trading down $0.16 (5.65%) to $2.67. — Phil Harvey, Senior Editor, Light Reading
It is always very distressing to hear bad stories about Lucent. It is not clear to me why Schact was chosen by Armstrong of AT&T to be the chairman. Mr. Schacet and and Mr. McGinn totally destroyed Lucent. These two guys spent close to $75 Billion. All this expense did not bring any benefit to Lucent but drained away all the cash it had. There was never any enquiry made as to why useless acuisitions were made. Many employees who recommended acquisitions are still with Lucent.
Agree ... not sure about your 75Bill number, but I'd question why was Ascend acquired, only to drive away all the talent. I'd question why where all the product lines hosed. I'd question why Chromatis - remember that POS acquisition? - was acquired.
Lucent as a business entity is not likely to succeed because of the composition of the management team. Most of the guys in the management team do not have much background in telecommunications and because and other reasons Lucent wii not be able to compete.
Lucent "management" are nothing but a bunch of inbred ass-kissing politicians. Watch 'em dance all the way to the bank, while the retirees bleed.