Lucent dives after warning of slow growth

Shares in the communications equipment maker fall as much as 16 percent after the company warns of weaker growth ahead.

Lucent Technologies today reported better-than-expected third-quarter earnings but warned of weaker growth ahead.

Lucent's shares nose-dived after the warning, falling $10.38, or 16 percent, to $54.13. In after-hours trading, the company's share's inched up 31 cents to $54.44, according to the Island ECN Web site.

The communications equipment giant, which also said it intends to take its microelectronics business public, said pro forma earnings from continuing operations rose 30 percent to $1 billion, or 30 cents a share, for its third quarter ended June 30. This compares with $732 million, or 23 cents a share, in the company's year-ago period.

Analysts polled by First Call/Thomson Financial expected Murray Hill, N.J.-based Lucent to earn 29 cents per share.

Meanwhile, Lucent said it anticipates a 15 percent decline in pro forma earnings per share for its fiscal 2001 first quarter because of a shift from switching products with higher profit margins to newer products with initially lower margins. The acquisitions of Chromatis and Ortel are also expected to affect bottom-line results for the same quarter.

For the quarter, revenues from continuing operations increased 20 percent to $8.7 billion, compared with $7.2 billion in the same period a year ago. Strong revenue growth in the quarter was driven by sales of Internet service provider networks, wireless networks, professional services and customized chips for high-speed data networks, the company said.

Within the United States, revenue increased about 49 percent over the same quarter last year. Overseas revenue increased about 26 percent and represented approximately 40 percent of overall sales.

Lucent said it expects pro forma revenues from continuing operations to grow about 15 percent for the fourth quarter ending Sept. 30 and pro forma earnings per share from continuing operations to be roughly in line with revenue growth.

The company said fourth-quarter expectations reflect product transition issues associated with a faster-than-expected decline in circuit-switching product sales, which is not expected to be offset as quickly by the introduction of newer products.

For the upcoming fourth quarter, analysts surveyed by First Call project the company to post a profit of 42 cents a share.

Lucent has struggled with execution in the past. The company blamed its poor first-quarter results on its inability to meet its service provider customers' demand for optical networking equipment, lower software sales and delays in purchases by other service providers.

Richard McGinn Last quarter, Lucent beat expectations and changed its manufacturing strategy by letting go of some operations and keeping only the production of high-end equipment.

Still, the company said revenues from continuing operations are expected to grow 20 percent in the first quarter of next year.

"We've completed the quarter with strong growth in our data-networking, wireless, professional services, optoelectronics and optical fiber businesses," Lucent chief executive Richard McGinn said in a statement. "With today's announcement of our spinoff of the microelectronics business, we will create two vibrant new companies positioned to lead in the Internet infrastructure and communications semiconductor markets. The fact is, we are dividing Lucent in order to accelerate growth."

Separately, the company announced plans to spin off its $4 billion microelectronics business, which includes the optoelectronics components and integrated circuits (IC) divisions.

Lucent said it's planning an initial public offering for up to 20 percent of the new company in the first quarter of 2001, with the remaining shares expected to be spun off in a tax-free distribution by next summer.

Last month, Lucent filed with the Securities and Exchange Commission to spin off its businesses that serve large corporations. The spinoff strategy should be completed by the end of September and will help the company focus on its higher-growth areas, such as wireless telephone and Internet equipment.