Wireless sales lift Lucent earnings

After years of dismal earnings, Lucent Technologies posts a profit for the second quarter in a row, boosted by growth in its wireless equipment business and deals in China.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
2 min read
After four years of dismal earnings, Lucent Technologies has posted a profit for the second quarter in a row, boosted by growth in its wireless equipment business.

The company, which makes gear for telephone and wireless communications providers, reported net income of $338 million, or 7 cents a share, for the first quarter of fiscal 2004, ended December 31. This compares with a net loss of $264 million, or 11 cents a share, the previous year. Revenue rose 8.9 percent to $2.26 billion, from $2.08 billion.

Lucent's results included income tax benefits and a gain on an investment sale. But the company said these benefits were partly offset by a charge associated with a settlement with shareholders last month. The results also included restructuring charges related to the reassessment of prior-year business plans.

In total, these special items added 4 cents a share to the first-quarter results, according to the Murray Hill, N.J., company. Analysts had expected Lucent to report a loss of a penny per share, according to Thomson First Call.

Lucent has struggled to reach sustained profitability over the past few years as the telecommunications market has sagged. After 13 straight quarters of losses, it posted its first quarterly profit since March 2000 for the quarter ending in September.

Most of Lucent's growth came from its mobility systems group, which includes wireless communications equipment. Revenue from sales of this gear jumped 32 percent to $960 million. Lucent CEO Patricia Russo said during a conference call that sales of CDMA (code division multiple access) network equipment in China helped lift the total.

While Lucent's wireless business grew, its wireline business declined. The company reported that revenue from its integrated network products fell 6.9 percent to $790 million. Frank D'Amelio, chief financial officer at Lucent, attributed this shortfall to carriers in China not accepting some network deployments. He said the revenue will likely be counted in the second quarter.

In addition, Lucent reported a 4.3 percent decline in revenue from its Worldwide Services, which took in $466 million.

The company didn't provide guidance for the second quarter, but it did say that it expects annual revenue to remain flat or to increase slightly. Executives said they expect the company will post a profit for fiscal 2004 and that revenue will begin to come in from the recently announced contract wins with China Unicom and China Telecom, which are worth $350 million.

"We are clearly seeing evidence that the market is stabilizing," Russo said. "While we remain cautious, we are encouraged by the recent news we have seen from some of our customers."

Investors seemed to take Lucent's gains in wireless with a grain of salt. On Wednesday, the stock closed down 33 cents at $4.42 per share, a decline of 6.95 percent.