Lucent CEO Sees FY2000 Revenue Growth Of Around 17%
January 20, 2000
Dow Jones Newswires
By Johnathan Burns
NEW YORK -- Just hours after reporting disappointing results for the first quarter of fiscal year 2000, the leader of the nation's most widely held company exuded the kind of confidence that had made Lucent Technologies Inc. (LU) a Wall Street darling.
After all, Lucent Chief Executive Richard McGinn's company had a 15-quarter record of meeting or exceeding earnings expectations until now.
And McGinn sounds ready to start another 15-quarter streak.
"We have to regain Wall Street's confidence by communicating our plans and executing," he told Dow Jones Newswires, adding that one of the central issues in the future "is the enormity of opportunity out there."
After market close Thursday, Lucent reported that first-quarter profits fell 23% due to low sales for established products and a slow rollout of those in demand. Net income excluding items was $1.18 billion, or 36 cents a share, compared with net income excluding items of $1.52 billion and 48 cents a share a year ago. Sales for the quarter, at $9.91 billion, were basically flat with last year's $9.84 billion.
But McGinn seemed sure Thursday evening that the company had just hit a bump in the road.
He said the company should see revenue growth of 17% in the fiscal year, which splits the difference between 1999's growth of 20% and 1998's growth of 14%.
Lucent's slow start in the first quarter means "it's not going to be possible to deliver 20% growth," McGinn said. "We think that 17% is pretty good for a company with a $38 billion base."
To his credit, say Wall Street analysts, McGinn and Lucent have blamed no one but themselves for the disappointing quarter.
"You've got to respect a company that takes the blame on themselves instead of blaming the market," said George Hunt, analyst with Wachovia Securities. "By the end of the year, I expect Lucent will close the gap."
McGinn said the company, which was spun off from AT&T Corp. (T) in 1996, made a strategic mistake a while ago. That mistake - the decision to focus on a method of increasing the data capacity of fiber called wavelength division multiplexing - allowed rival Nortel Networks Corp. (NT) to roll out capability referred to as OC-192, which boosts the speed of data along fiber.
"We chose to ship wave division multiplexing and then come back to OC-192," he said. "We didn't realize how quickly (customers) would (adopt) OC-192. Nortel did a very, very good job taking that space."
But McGinn said Nortel hasn't yet faced a large competitor in the space.
That's about to change.
"Now we're introducing ours," he said. "Certainly, we're far behind" in introducing the product. "It was a choice, and it was the wrong choice," McGinn said. "They've had no competition to speak of. Now, there's going to be a very strong competitor."
McGinn said Lucent, which posted reduced gross margins in the first quarter - they fell to 46.9% from 53% - should return margins to the mid to high-40s.
"We're back on it," he said.
The opportunity for Murray Hill, N.J.-based Lucent and other equipment makers in the fiber-optic space is expected to grow from about $5.5 million in 1999 to more than $21 billion in 2003.
Fiber-optical equipment accounts for only 12% of Lucent's business.
McGinn said that isn't the only growth opportunity. wireless service providers are increasing spending exponentially as the oncoming wave of data and voice transmission threatens to soak current networks.
"In the last year, we took more market share than anyone out there," he s!id. "Wireless growth is exceptionally strong. We expect the market to grow by 21% this year. We are really buoyed by the opportunities out there."
-By Johnathan Burns, Dow Jones Newswires,
201-938-2020, johnathan.burns@dowjones.com |
