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Lucent Posts First Profit Since 2000

October 22, 2003

MOUNT LAUREL, N.J. (AP) _ Lucent Technologies ended a 13-quarter streak of losses in posting a profit Wednesday, and its chief executive said the telecommunications gear maker is nearly done downsizing and is ready to focus on increasing revenue.

After more than three years of reporting quarterly losses _ often multibillion-dollar figures _ the Murray Hill-based company reported net income of $99 million, or 2 cents per share, for the three months ended Sept. 30.

That compared to a net loss of $2.8 billion, or 84 cents per share in the same period last year.

While the company’s losses have been shrinking in recent quarters, Wall Street did not expect a profit for the past quarter or the current one. The 30 analysts surveyed by First Call had a consensus for loss of 4 cents per share for the fourth quarter; none expected a profit.

Lucent CEO Patricia Russo said the company’s restructuring into a smaller firm is essentially complete and that the big layoffs of the last few years are over.

``We have weathered the storm,″ she said.

The new emphasis, she said, will be on increasing revenue, which was down this quarter from the same period a year ago.

She also said that the quarterly profit is not an indication that the company will be able to be profitable in the next few quarters.

``In the current challenging marketing environment, it’s likely we will still have some ups and downs on the way to sustained profitability,″ she said.

But investors responded favorably to the news, pushing Lucent’s stock up 33 cents to close at $2.78 on the New York Stock Exchange.

The company has shrunk its losses by becoming a smaller operation, with 34,500 employees worldwide, down from a peak of about 150,000 three years ago. Through layoffs and other cost-cutting measures, Lucent has slashed operating expenses to $524 million for the quarter, down 79 percent from $2.5 billion a year earlier.

Revenue for the most recent quarter was $2.03 billion, down 11 percent from the $2.28 billion it brought in during the year-ago period. Analysts surveyed by Thomson First Call expected $2.16 billion in revenue in the most recent quarter.

For the fiscal year, Lucent lost $770 million, or 29 cents per share, down from a loss of $11.8 billion or $3.49 per share last year.

Analysts surveyed by First Call do not expect the company to make a profit in the new fiscal year, but expect losses to continue to shrink.

Despite the profit, Erik Zamkoff, an analyst with Independent Research Group called the results disappointing, pointing to the lower than expected revenue.

He said cost-cutting and fortunate timing accounted for the profit, something he doesn’t expect to happen in a sustained way until the July-September quarter of 2004.

On reason for the lower-than-expected revenue, said Paul Sagawa, an analyst with Bernstein, was that Lucent did not include $200 million expected in a deal with Reliance Infocom for work on a wireless networks in India. That revenue will turn up in a quarterly earnings report eventually, Sagawa said.

Sagawa said showing a profit should help Lucent restore an image that took hits when the company admitted three years ago that it had prematurely booked sales in its financial reports. Around the same time, orders from its telecommunications and Internet customers all but halted as those once burgeoning industries struggled.

``This is a company that has been seemingly downgraded with respect to its peers because of its inability to break even,″ he said.

Still, Sagawa expects the company to lose money again in the next one or two quarters before making sustained profits.

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On the Net:

Lucent Technologies: http://www.lucent.com