LWOLF---Dow Jones Newswires -- July 22, 1998
Lucent CFO: Co. Hasn't Planned Stock Split, But May Mull It
By Shawn Young
NEW YORK (Dow Jones)--Lucent Technologies Inc. (LU), which had a 2-for-1 stock split in April, hadn't been planning another one right away, but it could consider splitting its shares again, Chief Financial Officer Donald K. Peterson said.
"It hasn't been an active project, but I'm beginning to take the message that maybe it should be," Peterson told Dow Jones Wednesday in an interview about third fiscal quarter earnings.
As Lucent's stock has once again surged past 100, there has been extensive speculation that the company could split the stock again. Peterson said he has gotten many questions in recent days about the possibility of another split.
Lucent is the second most widely held stock in the country, after AT&T Corp. (T), and about 60% of its shares are held by retail investors. Stock splits, which reduce the price of each share, are helpful for keeping shares within the reach of individual investors.
That would be one of the company's considerations if it weighs another split, Peterson said. The April split, he said, "was a wonderful success for us."
Lucent's shares have performed phenomenally since they first went on sale in April of 1996 at a split-adjusted initial public offering price of 13 1/2. The shares were near 100 in February when the company announced plans to split the stock. The day before the April 2 split, shares closed at 132 1/8. They stormed back into triple digits this week, hitting a 52-week high of 108 1/2 on Tuesday. The activity prompted speculation about another split.
Recently the NYSE-listed shares were down 1 13/16, or 1.8%, at 100 5/16 in a torrent of trading. More than 12.5 million shares had changed hands, compared with a daily average of 5 million.
Although stock splits make no difference to a company's fundamentals, investors, particularly individuals, tend to regard them as a bullish sign. Stocks often rise sharply before a split goes into effect.
Stock split or no, Lucent's chief financial officer expects the company to sustain its growth and continue to cut costs as market share grows.
"I don't really see a lot of changes in the prime drivers of demand," Peterson said. As telecommunications companies keep building new networks and refurbishing old ones, he added, Lucent expects to benefit not only from an expanding market but from expanding market share.
"I am comfortable in asserting that we're taking market share," he said. He declined to provide numbers.
The consensus of analysts polled by First Call is that the Murray Hill, N.J., company will earn $1.63 a share from continuing operations this fiscal year and $1.96 in fiscal 1999.
Peterson said he has no qualms about current estimates but noted it is hard to tell where forecasts are going given that the company has consistently beaten earnings expectations. Analysts are likely to raise targets now that Lucent has again topped their earnings projections.
Although he declined to give earnings guidance, Peterson said Lucent expects continued cost-cutting and strong margins to keep contributing to the bottom line.
The company has been steadily reducing sales, general and administrative expenses.
"It does get harder as you get closer to the high end," Peterson said. But harder doesn't mean impossible.
"There's definitely more to get in productivity across the board," he added, again declining to give particulars.
Lucent expects margins to remain good, but despite impressive margins in recent quarters, Peterson said he is reluctant to claim the company has reached a new plateau. Margins fluctuate somewhat according to, among other things, seasonal factors, he said.
Lucent posted a fiscal third-quarter gross margin of 45.4%, substantially above the historical average of 42% to 43%. Margins so far this fiscal year have been well above that level.
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