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Lucent issues warning for next two quarters

Lucent Technologies (NYSE: LU) warned that its earnings and sales growth for the next two quarters will be lower than expected. The company also beat Wall Street estimates for its fiscal third quarter and announced the spin-off of its microelectronics business.

Lucent's warning echoes a similar warning a few quarters back. Analysts were hoping the company was on the turnaround path. The company said earnings and revenue growth would be about 15 percent its fourth quarter, ending Sept. 30. That growth would put Lucent below First Call Corp. consensus estimates of 42 cents a share for the September quarter.

The company said the fourth quarter would be hurt by "product transition issues associated with a faster-than-expected decline in circuit switching sales." Lucent said a slower ramp up of its optical networking products and a "substantial reduction of a major long-term foreign project."

In the first quarter ending Dec. 31, Lucent said it will post revenue growth of about 20 percent from continuing operations, but a 15 percent decline in earnings. Wall Street was expecting earnings of 41 cents a share in the December quarter, up from 34 cents a share in the prior year period.

The first quarter slowdown was "due to a major shift from higher margin switching products to newer products with initially lower margins associated with the ramp-up of new technology," the company said. Results would also be diluted from the acquisitions of Chromatis and Ortel.

Lucent said it would sharpen its execution to deliver better results.

The profit warning was initially lost in a barrage of news from Lucent. The company reported second quarter earnings of $1 billion, or 30 cents a share, on sales of $8.7 billion. The results were a penny ahead of estimates.

Lucent also said it would launch the initial public offering of its communications microelectronics business. That spin-off had been widely anticipated. Lucent will take the $4 billion unit public to cash in on the hot optoelectronics components and integrated circuits (IC) markets. Lucent will initially spin off 20 percent of the company in its December quarter and distribute the remaining shares next summer.

Richard McGinn, CEO of Lucent, said in a statement it was "dividing Lucent in order to accelerate growth."