Lucent Nearly Doubles Money Set Aside For Bad Customer Debt in Fiscal 2000
By SHAWN YOUNG
Staff Reporter of THE WALL STREET JOURNAL
Taking a more cautious approach in its accounting, Lucent Technologies Inc. ended fiscal 2000 with substantially more funds set aside for bad customer debt than it had at the end of fiscal 1999, according to the annual report the company filed with the Securities and Exchange Commission.
Lucent added $252 million to its provision for bad customer debt in fiscal 2000, which ended Sept. 30, boosting the total it had set aside for customer defaults on bills to $501 million, according to the filing.
The finances of the Murray Hill, N.J., telecommunications-equipment maker have been under scrutiny this year as it has unveiled a series of financial letdowns that have caused its stock to plummet. Among investors' fears are concerns that slower spending and financial distress among telecommunications carriers could leave Lucent vulnerable to uncollected bills and defaults by customers to which it has extended credit.
Lucent fell 56 cents, or 4.1%, to $13.13 in 4 p.m. Thursday New York Stock Exchange composite trading.
In fiscal 2000, despite increasing its cushion for bad debt, Lucent actually wrote off just $69 million. That is less than the $112 million it wrote off in fiscal 1999, when it added $67 million to the reserve and ended the year with $318 million set aside for doubtful accounts.
Lucent's increase in the reserve reflects its efforts to be more conservative in its accounting as it attempts a turnaround, said Sanford C. Bernstein & Co. analyst Paul Sagawa.
The company ended fiscal 2000 with $6.7 billion in promises to extend credit to customers. About $1.3 billion of that credit actually had been extended, the filing says. In addition, Lucent had promised to co-sign loans for customers for about $1.4 billion, and customers had taken $770 million in loans with Lucent's guarantee.
Lucent's woes have stemmed from efforts to grow at a faster rate than it could sustain and from its failure to anticipate demand for faster optical-networking equipment, company officials have said. Analysts have voiced concern about a buildup in inventory, the looming obsolescence of key products and customers taking longer to pay bills.
Lucent ended fiscal 2000 with $892 million set aside for gear it can't sell, compared with $709 million at the end of 1999, the filing says. It also saw its average wait for payment expand to 102 days from 89 days. The company said this largely is due to an increase in sales outside the U.S., where payments tend to come more slowly.
Lucent didn't discuss the dismissal of former Chairman and Chief Executive Richard McGinn in the filing, but the company will address the matter in its proxy statement, which it expects to file in January, a company spokeswoman said. Also in January, the company expects to disclose details of an upcoming charge related to a sweeping restructuring and turnaround effort.
Write to Shawn Young at shawn.young@wsj.com |
