The full press release
October 22, 1998
LUCENT TECHNOLOGIES REVENUES INCREASE 23 PERCENT ON CONTINUING OPERATIONS
IN FOURTH FISCAL QUARTER
-- NET INCOME UP 49 PERCENT, EXCLUDING ONE-TIME ACQUISITION CHARGES
-- REVENUES FOR FISCAL 1998 EXCEED $30 BILLION
MURRAY HILL, N.J. -- Lucent Technologies today reported revenues of $8.038
billion for the fourth fiscal quarter ended September 30, 1998, an increase
of 23 percent on continuing operations1 and 16 percent on a reported basis.
Revenues for the year-ago quarter were $6.933 billion on a reported basis.
Net income for the quarter increased 49 percent to $548 million, or 41
cents a share2, excluding one-time charges related to acquisitions. Net
income for the year-ago quarter, excluding one-time Octel Communications
acquisition charges, was $369 million, or 28 cents a share.
For the fiscal year ended September 30, 1998, revenues increased 20 percent
on continuing operations and 14 percent on a reported basis to $30.147
billion. This compares with revenues of $26.360 billion in fiscal 1997 on a
reported basis.
Net income rose 52 percent to $2.287 billion or $1.72 a share for the
fiscal year, excluding one-time events. This compares with net income of
$1.507 billion or $1.17 a share for fiscal 1997, excluding one-time Octel
acquisition charges.
"Lucent had a very solid quarter, and we are continuing to see strong
demand across all of our businesses from both traditional and new
customers," said Richard McGinn, Lucent Technologies chairman and chief
executive officer.
"We are particularly pleased by the 41 percent increase in revenue that
Lucent experienced outside the U.S. this quarter, which we believe bodes
well for our international growth strategy," McGinn said. "It is clear
Lucent is gaining market share."
McGinn also noted that despite declines in the world semiconductor market,
Lucent's microelectronics business posted revenue growth of 10 percent for
the year, due to the company's leading position in semiconductors for
communications applications.
For the quarter, including one-time charges related to acquisitions, the
company reported net income of $388 million, or 29 cents a share. Results
for the quarter include a $17 million, pre-tax ($11 million, after-tax)
reversal of business restructuring reserves, which were recorded in
December 1995.
In the year ago quarter, the company reported a net loss of $597 million,
or 47 cents a share, including one-time charges associated with the
acquisition of Octel.
For the twelve months ended September 30, 1998, including one-time events,
the company reported net income of $970 million or 73 cents a share.
Results include $100 million in pre-tax ($64 million, after-tax) reversals
of business restructuring reserves.
For the year ended September 30, 1997, the company reported net income of
$541 million, or 42 cents a share, including one-time Octel acquisition
charges.
Review of Operations - Three Months Ended September 30, 1998
For the quarter, revenues for systems for network operators increased 22
percent to $4.747 billion, revenues for business communications systems
increased 35 percent to $2.438 billion, and revenues for microelectronic
products increased 4 percent to $811 million.
SYSTEMS FOR NETWORK OPERATORS
Revenues increased by 22 percent over the year-ago quarter to $4.747
billion, led by sales of switching and wireless systems with associated
software, optical networking systems, communications software, and data
networking systems for service providers.
Revenues, which were strong among both traditional and new customers, were
led by sales to RBOCs (Regional Bell Operating Companies), competitive
local exchange carriers, wireless service providers, and long distance
carriers. Continued demand for data services and Internet access in
businesses and residences contributed to the group's quarterly revenues.
Within the U.S., revenues increased by about 14 percent over the year-ago
quarter. Revenues outside the U.S. increased about 49 percent and
represented approximately 29 percent of the group's revenues for the
quarter.
For the 12 months ended September 30, 1998, revenues increased 20 percent
to $18.752 billion.
BUSINESS COMMUNICATIONS SYSTEMS
Revenues increased 35 percent to $2.438 billion compared to the year-ago
quarter. The group's results were primarily driven by sales of Definity(R)
Enterprise Communications Servers - including those with call center
applications, sales of messaging systems - including those provided by
Octel, enterprise data networking systems, SYSTIMAX(R) networking systems,
and services.
Within the U.S., revenues increased by about 30 percent over the year-ago
quarter. Revenues outside the U.S. increased about 57 percent and
represented approximately 20 percent of the group's revenues for the
quarter.
For the 12 months ended September 30, 1998, revenues grew 26 percent to
$8.093 billion.
MICROELECTRONIC PRODUCTS
Revenues increased 4 percent over the year-ago quarter to $811 million,
driven by sales of chips for communications and computing, including data
networking, mass storage, network communications, and optoelectronics
components. Increased revenues from power systems also contributed to the
increase.
Within the U.S., revenues decreased approximately 4 percent over the
year-ago quarter. Revenues outside the U.S. increased about 12 percent and
represented approximately 53 percent of the group's revenues.
For the 12 months ended September 30, 1998, revenues rose 10 percent to
$3.027 billion.
COSTS AND EXPENSES
As a percentage of revenue, gross margin for the quarter improved to 47.1
percent from 44.1 percent in the year-ago quarter, reflecting a more
favorable mix of products and services as well as improved management of
costs.
Selling, general and administrative expenses (SG&A) accounted for 22.7
percent of revenues in the quarter, compared to 23.2 percent in the period
a year-ago, excluding Octel charges.
Excluding one-time acquisition charges, as a percentage of revenue,
research and development spending for the quarter increased to 12.1 percent
from 12 percent during the 1997 period, due to investments in high growth
areas such as wireless, data networking, and optical networking, as well as
switching and access systems.
Excluding one-time acquisition charges, net income for the quarter was
driven by revenue growth, higher gross margins, and a decrease in the
company's effective tax rate to 36 percent, compared to 38.1 percent in the
year-ago quarter.
Separately, the company announced today its intention to end its joint
venture with Philips Electronics, Philips Consumer Communications (PCC), of
which Lucent is a 40 percent minority interest holder. It is expected that
Lucent and Philips will each regain control of the original businesses that
were contributed to the venture by November 30, 1998.
Lucent plans to sell its portion of the venture that includes the leading
corded and cordless phones and answering machines in the U.S. market, as
well as a telephone leasing business. The company will continue to make
these products and the leasing service available through existing outlets
until a buyer can be found. Lucent will close down its wireless handset
portion of the venture. Included in results for the fiscal fourth quarter
is a charge associated with the writedown of the company's investment in
PCC, offset by one-time gains related to the sale of an investment and
certain business operations, including the Bell Labs Design Automation
Group.
Lucent Technologies, headquartered in Murray Hill, N.J., designs, builds
and delivers a wide range of public and private networks, communications
systems and software, data networking systems, business telephone systems
and microelectronic components. Bell Labs is the research and development
arm for the company. For more information on Lucent Technologies, visit the
company's web site at lucent.com
This news release contains forward-looking statements based on current
expectations, forecasts and assumptions that involve risks and
uncertainties that could cause actual outcomes and results to differ
materially. These risks and uncertainties include price and product
competition, dependence on new product development, reliance on major
customers, readiness for Year 2000, control of costs and expenses,
international growth, general industry and market conditions and growth
rates and general domestic and international economic conditions including
interest rate and currency exchange rate fluctuations. For a further list
and description of such risks and uncertainties, see the reports filed by
Lucent with the Securities and Exchange Commission. Lucent disclaims any
intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
# # #
1 Includes revenues for Lucent's Systems for Network Operators,
Microelectronic Products and Business Communications Systems businesses
(including Octel Communications, Livingston Enterprises and other recently
acquired businesses), and excludes revenues from the company's former
Consumer Products business, which became part of a venture owned by Lucent
and Philips Electronics N.V.; and from Lucent's Advanced Technology Systems
business, which the company sold. For the twelve months ended September 30,
1998, the calculation of revenue growth on a continuing operations basis
also excludes revenues from the company's former Custom Manufacturing
Services business, which was sold.
2 All earnings per share reported in this release are Diluted EPS and
reflect the effect of a two-for-one stock split effective April 1, 1998.
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