Lucent Technologies' fourth-quarter profits fell 22 percent as
the struggling telecommunications equipment giant on Monday beat revised
Wall Street analyst projections by a penny.
Stock price from October 1999 to present.
Source: Prophet Finance
Lucent announced a fourth-quarter profit of $600 million, or 18 cents a
share, on revenue of $9.4 billion. The company earned $768 million, or
24 cents a share, on revenue of $8.2 billion last year. The figures do not
include one-time charges or revenue from Avaya, the company's corporate
networking business that was spun off in September.
Financial analysts had expected revised earnings of 17 cents per share,
according to a poll taken by First Call/Thomson Financial. Expected earnings were previously set at 24 cents per share.
Wall Street analysts revised their estimates two weeks ago after Lucent
executives warned of an
earnings shortfall because of slow sales of optical networking equipment, a
decline in the sale of traditional voice products and the need to store more cash to cover potential bad loans to emerging service provider customers.
Because of the company's financial troubles, Lucent's board of
directors Monday ousted chief
executive Richard McGinn and replaced him with former Lucent chief
executive Henry Schacht to run the company as interim leader. The company
also warned that sales for the upcoming first quarter will decline 7
percent from the previous year's first quarter. The profit warning is the
company's fourth earnings warning this year.
"This leadership is under way and taking actions intended to create the new
Lucent," said Schacht in a conference call with financial analysts. "This
is a transition year, and we'll make progress quarter after quarter and
make timely decisions that are going to create a healthy company."
Drastic makeover in the works
Schacht, who will run Lucent while it searches for a new chief
executive, said the company will look for a tech-savvy candidate that can
run day-to-day operations.
"We intend to turn the company to a new CEO on a new track and...in
the condition it's expected to be in," he said.
During the conference call, Lucent executives reiterated that the
company is undergoing a major reorganization, which includes restructuring
the sales and professional services organizations, potential revamping of
the company's family of products, and possible layoffs.
Analysts expect Lucent will be in the throes of restructuring for much
of the new fiscal year.
"The outlook is disappointing," said analyst David Powers of Edward
Jones. "They are trying to drastically change how they do business, and
it's probably going to be several quarters of transition and restructuring."
Lehman Brothers analyst Steve Levy has a wait-and-see
attitude. While Lucent warned that sales in the first quarter will drop 7
percent, executives declined to give analysts any guidance for the rest of
the new fiscal year. Lucent executives said they will have more of an
accurate picture of the remaining year when it reports earnings next quarter.
"Their outlook is pretty murky. They're not giving guidance after the first
quarter, so that raises uncertainty," Levy said. "They're moving in the
right direction, but I'm not sure how fast they can turn it around."
Fourth-quarter revenue from selling networking equipment to service
providers reached $7.2 billion, a 4.8 percent increase from last year.
Sales from the company's microelectronics and chipmaking unit grew 59
percent to $2.1 billion.
Lucent executives said in the conference call that revenue from optical
equipment fell 26 percent from the same quarter last year, while sales of
traditional voice equipment fell 13 percent. Wireless equipment sales,
however, increased 3 percent from last year's fourth quarter.
Lucent's shares dropped 56 cents to $22.06 during regular trading. In
after-hours trading, as of 3:10 p.m. PT, the company's stock rose $1.07 to
$23.13, according to the Island ECN Web site.