Only two years ago, Lucent was spun off from AT&T amid industry skepticism. Many said it would flop as a stand-alone operation. To the contrary, the spun-off Lucent unit is booming, while AT&T--the nation's largest telco, which traces its roots back to 1885--struggles. Its stock has been flat all year, while Lucent's has skyrocketed.
This ironic twist underscores how companies such as Lucent are benefiting from the much-hyped convergence of voice and video.
Telcos such as AT&T, meanwhile, face intense competition under deregulation. AT&T also has been criticized for being too sluggish when it comes to meeting the competition and launching an Internet strategy, although some analysts have seen signs of improvement.
Lucent's stock rose to 76.25 in trading today, up 2.06. It has traded as high as 79 and as low as 28.88 during the past 52 weeks. The company's market value reached $101.3 billion today, and its stock has appreciated nearly 91 percent this year alone.
AT&T's stock rose 0.88, to 60.13, today. It has traded as high as 68.5 and as low as 31.88 during the past 52 weeks. AT&T's market value stood at $97.43 billion, and its stock has fallen nearly 2 percent this year.
The buyout fills in "another key space" in Lucent's data network, Bill O'Shea, president of Lucent's Data Networking Systems group, said when the deal was announced. ATM technology is growing at annual rates of more than 60 percent, and Yurie is a market leader, he noted.
Last week, Lucent reported that its earnings more than doubled for the fiscal second quarter, to $180 million, or 14 cents a share, from $66 million, or 5 cents a share. Analysts had expected closer to 9 cents a share for the current quarter. Lucent's quarterly revenue rose to $6.16 billion from $5.15 billion.
By contrast, AT&T's quarterly gains were more modest. Many analysts, however, are optimistic that the telco giant is turning around under chief executive C. Michael Armstrong. He has cut costs, but his next challenge is to jump-start AT&T's sales.
AT&T also is making progress on an Internet strategy, but it still has a ways to go, analysts said. Competing telcos, such as WorldCom, are building Net powerhouses with rapid-fire acquisitions.
Armstrong's predecessor, Robert Allen, received much criticism for AT&T's performance under his stewardship. Under Allen, however, AT&T decided to spin off Lucent.
AT&T shareholders own a stake in Lucent, too. AT&T shareholders of record on September 17, 1996, received a distribution of 0.324 shares of common stock of Lucent Technologies for every share of AT&T stock owned.