Lucent Cuts 2006 Outlook

Lucent's share price takes a 10 percent hit in pre-market trading as it says revenues for 2006 will be flat or grow only slightly

January 13, 2006

3 Min Read
Lucent Cuts 2006 Outlook

Lucent Technologies Inc. (NYSE: LU) saw its share price lose 10 percent of its value in pre-market trading this morning as the company warned that revenues in its 2006 fiscal year, which runs to September 30, will "be essentially flat or increase in the low-single digits for the year" instead of the previous predictions of mid-single digit growth. (See Lucent Revises 2006 View.)

Lucent achieved revenues of $9.44 billion in its 2005 financial year. Analysts, on average, had been expecting 2006 revenues to hit $9.96 billion, a year-on-year increase of 5.5 percent.

The news hit the wires at 7am Eastern. Shortly after, the vendor's share price had dropped 27 cents, 10 percent, to $2.44 in pre-market trading. It closed Thursday trading at $2.71.

The news will come as a blow to investors and analysts who had heard the mid-single digit growth figure for 2006 revenues reiterated on a number of conference calls during 2005, including as recently as last October. (See Pension Concerns Hit Lucent.)

In its statement, Lucent said it expects revenues for the first quarter of fiscal 2006, which ended December 31 2005, to be about $2.05 billion. That's down from $2.43 billion in the previous quarterly period, and way below average analyst expectations of $2.44 billion. The company blames lower than expected sales in the U.S. and China for the shortfall, adding that it expects sales in the second half of the year to be higher than in the first six months.

"As a result of the first-quarter performance and a review of our expectations for the remainder of the year, we believe it is prudent to change our full-year revenue guidance at this time," said Lucent CEO Patricia Russo in a prepared statement.

"While we are clearly disappointed, we consider this to be a temporary setback to the progress we have made, and we are confident that our performance will be much stronger for the remainder of the year," she said, before adding a namecheck for the role of the IMS (IP Multimedia Subsystem) framework for next generation networks, an area where Lucent has had some high profile marketing success in the past year. (See Lucent Takes IMS to China, Cingular Picks Lucent for IMS, SBC Picks Lucent IMS, and Lucent Lands BellSouth IMS Deal.)

Lucent will report its first quarter financials in full on January 24.

Lucent's announcement may not come as such a big shock to some. In a research note issued only four weeks ago, analysts at Lehman Brothers noted that while Lucent generates significant revenues, it relies heavily on several key customers, particularly Verizon Communications Inc. (NYSE: VZ) and Verizon Wireless in the U.S., which, combined, accounted for 27 percent of total revenues in fiscal year 2004. The analysts named Sprint Corp. (NYSE: S) as another major revenue contributor.

Lucent also announced today that it's seeking a new CFO, as the incumbent numbers man, Frank D'Amelio, has been named as the vendor's Chief Operating Officer (COO). D'Amelio will continue as CFO until a replacement is found. (See Lucent Names D'Amelio COO.)

Lucent isn't the only major North American telecom vendor facing significant challenges in 2006. (See Nortel's New Faces Face Tough Task.)

— Ray Le Maistre, International News Editor, Light Reading

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like