Lucent: Slow wireless sales will hurt earnings
By Reuters
news.com.com
Story last modified Tue Jul 11 07:37:44 PDT 2006
Lucent Technologies said on Monday it expects third-quarter earnings to fall due mainly to slower sales of wireless network equipment in North America, in news that pushed down its shares.
Lucent, which also said it expects its merger with France's Alcatel to close on time by the end of this year, saw its fiscal third-quarter net income at 2 cents per share, down from 4 cents in the second quarter and 7 cents a year earlier.
The communications gear maker said revenue for the quarter, ended June 30, would be $2.04 billion, compared with $2.14 billion in the second quarter and $2.34 billion a year ago.
Analysts on average expected earnings of 5 cents a share on revenue of $2.33 billion, according to Reuters Estimates.
Lucent shares fell $2.16, or nearly 8 percent, on Inet post-market trade after the news, before recouping some losses, and was down 7 cents from its close of $2.34. It hasn't traded above $5 a share since the middle of 2002.
Analysts said Lucent's preliminary third-quarter results underscored the importance of its acquisition by Alcatel, which reaffirmed its own quarterly revenue forecast of about 3.38 billion euros ($4.3 billion).
"One of the reasons why Lucent is doing this deal is because their business is very concentrated at a small number of customers," said Bernstein analyst Paul Sagawa, who says North America represents more than 30 percent of revenue.
"It shouldn't be that big a deal if this stock is down. People should just buy it because of the synergies from the merger," Sagawa said.
Merger rationale
The two companies previously said they expect annual savings of $1.7 billion within three years.
Lucent said a fall in revenues in China affected its third-quarter profit when compared with a year earlier.
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Chief Executive Pat Russo also cited consolidation among its customers as having an impact on sales.
"Overall, our year-to-date results also have been affected to some extent by delays in spending that we believe are attributable to the consolidation efforts of certain customers," Russo said in a statement.
Lucent's U.S. customers include the top three U.S. wireless providers: Cingular Wireless, a venture of AT&T and BellSouth; Verizon Wireless, owned by Verizon Communications and Vodafone Group; and Sprint Nextel.
Charter Equity Research analyst Ed Snyder said the warning was probably mostly due to a spending lull at Lucent's biggest customer, Verizon Wireless, the No. 2 U.S. mobile provider.
Verizon has been upgrading its network for high-speed Internet services for the last few years and has said it plans its next broadband upgrade later this year
[Harry: First hint of a revenue recognition problem in China
by a big company. We need to see if this is more than a one
quarter event. If not the slowing of China will have a big effect on the worldwide economy.] |
