Despite Rivals' Woes, Lucent Says It Sees No Sign Of Weakened Demand
Dow Jones Online News, Friday, September 18, 1998 at 15:20
NEW YORK -(Dow Jones)- Amid warnings in recent days from some of its
rivals, telecommunications-equipment giant Lucent Technologies Inc.
Friday stressed that it has seen no signs of weakening demand and that
it remains confident it will meet analysts' forecasts for revenue and
earnings.
French telecom-equipment and electronics concern Alcatel SA stunned
investors Thursday by warning that earnings this year will come in short
of analysts' expectations. Motorola Inc. has been in the throes of a
protracted slump and smaller rivals Ciena Corp. and Tellabs Inc. earlier
this week issued warnings.
"We believe there is absolutely no evidence to support expectations
of a slowdown despite the difficulties experienced by some of our
competitors," Lucent said. Analysts are expecting Lucent (LU) to post
$30 billion in revenue and earnings of $1.70 a share for fiscal 1998.
Lucent, spun off from AT&T Corp. in 1996, said it currently has $18
billion in orders and is winning business away from competitors across
the board. Other Lucent rivals include Canada's Northern Telecom Ltd.,
Finland's Nokia Oy and Swedish company Telefon AB L.M. Ericsson.
And Cisco Systems Inc., the bigggest maker of computer-netorking
gear, has become a competitor as the voice and data-networking
industries rapidly converge. Lucent, Cisco and the other companies are
racing to develop gear that can handle voice, video and data
simultaneously. Lucent is broadening its line of data-networking
products in order to help telephone companies manage the exploding
streams of data, voice
Lucent believes the new world of telecommunications will be made up
of "networks of networks," including wireless systems, copper and
fiber-optic lines, and Internet backbone networks.
The one subject Lucent executives haven't shed much light on is the
company's acquisition strategy. Because it was spun off from AT&T,
Lucent has been barred from "pooling of interest" transactions under
accounting rules. That means Lucent faces unfavorable accounting
treatment for certain stock-swap takeovers. But that ban will expire
Oct. 1, on Lucent's second corporate birthday, prompting much
speculation about whether it will go on a buying spree. Experts believe
the Murray Hill, N.J., company needs to make a big splash in data
networking. Northern Telecom recently acquired data-networking company
Bay Networks, putting more pressure on Lucent.
Yet Lucent has plenty of strengths. The company has firm
relationships with the big telephone companies, including former parent
AT&T, SBC Communications Inc. and Bell Atlantic Corp. - three carriers
leading the consolidations among phone companies. Lucent is able to
offer "one-stop shopping," especially to smaller carriers that want a
single provider for all their equipment.
For the largest carriers, Lucent appears to be well-positioned to
integrate and help manage the networks crisscrossing the country. Some
big carriers would rather wait for a Lucent product to come on the
market than buy from an existing provider.
Lucent has been so hot that its biggest problem may be maintaining
momentum, analysts say. Since the 1996 spinoff, Lucent's share price is
up nearly sixfold, even with recent market volatility.
The competitiveness of the industry was underscored this week when
Lucent's name came up in the aftermath of the failed merger between
Ciena and Tellabs. Ciena officials said an unusual, negative
electronic-mail message had been sent to Tellabs from a Lucent facility.
The e-mail, which Ciena called "a very carefully crafted, sophisticated
piece of disinformation disparaging our products," was sent to its
intended merger partner on Aug. 28, Ciena alleged.
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