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To: Beltropolis Boy who wrote (980)	1/21/2000 3:16:00 PM
From: Mark Ambrose	Read Replies (1) \| Respond to of 1331

LUcent's Quarterly Profits Drop 23 % dailynews.yahoo.com ------------------------------------------------------------ Thursday January 20 7:28 PM ET Lucent's Quarterly Profits Drop 23 Pct By Jessica Hall NEW YORK (Reuters) - Telecommunications equipment maker Lucent Technologies Inc. (NYSE:LU - news) on Thursday said its first quarter profits fell 23 percent, even lower than Wall Street's reduced expectations, as the company failed to keep up with customers' demand for new optical networking products. Murray Hill, N.J.-based Lucent said it earned $1.175 billion or 36 cents a share, compared with $1.52 billion, or 48 cents a share, a year ago. Including one-time events, net income was $1.250 billion or 38 cents a share. First quarter revenues were flat at $9.9 billion, about $1 billion below analysts' previous forecasts. ``Yes, we did disappoint customers -- and that's never something you want to do -- but it was more of a function of our inability to deliver than a lack of demand for products,' Lucent Chairman Richard McGinn said in a telephone interview. McGinn said he was not aware of any investigation by regulators into Lucent's accounting techniques, quelling a rumor that circulated through the stock market last week. Lucent, the most widely held U.S. stock, earlier this month warned that its first quarter profits would fall as much as 25 percent due to delays in some customers' purchasing plans, its manufacturing constraints and its inability to develop more powerful products fast enough to meet customers' demands. After that warning, Wall Street analysts lowered their profit forecast to 37 cents a share, down from the original 54 cents a share, according to research firm First Call/Thomson Financial. Lucent's profit of 36 cents a share were a penny shy of the new forecast, although it was within the range the company provided earlier this month. ``It was very unremarkable,' said Steve Levy, a telecommunications analyst with Lehman Brothers, who has a 'neutral' rating on the stock. Before the results were released, shares of Lucent closed at 53-5/8, up 2-1/2 on the New York Stock Exchange. In after-hours trading, the stock fell 1 to 52-5/8, according to traders. The stock has fallen about 24 percent since Lucent's Jan. 6 profit warning. The shortfall marked a departure from Lucent's once unbroken streak of beating Wall Street's profit expectations every quarter since it was spun off from AT&T Corp. (NYSE:T - news) in 1996. Lucent has been pitted against chief rivals Cisco Systems Inc. (NasdaqNM:CSCO - news) and Nortel Networks Corp. (NYSE:NT - news) (Toronto:NT.TO - news) in a fierce battle to supply telephone companies, Internet service providers and large corporations with sophisticated equipment that can transmit increasingly large volumes of data and voice traffic. Lucent said it failed to properly gauge its customers' changing buying patterns and it lacked the manufacturing capacity to keep up with the red-hot demand for optical networking equipment. Lower-than-expected software sales also added to its woes. As a result, Lucent said first quarter sales to telephone companies and other service providers fell 2 percent to $6.216 billion. Sales to large corporations, however, rose 4 percent over to $2.005 billion. Sales of its Definity Enterprise Server, a phone switch capable of handling large businesses, were largely offset by decreased sales for its Systimax cabling systems for corporate campuses. Lucent has said it is working to address the weakness in its large business market. Sales in its microelectronics unit, which makes sophisticated chips for communications networks, increased 17 percent to $1.509 billion. Earlier on Thursday, Lucent made a bigger push into the semiconductor market when it agreed to acquire privately-held Agere for about $415 million in stock. That deal will allow it to move into the market for programmable semiconductors for data networks. Lucent's first quarter problems opened the door for rivals Nortel and Cisco to gain market share. Lucent may have a tough time winning back customers, analysts said. Lucent said it will not cut prices to win favor with customers. Instead, it is focusing on fixing its internal woes by the end of the second quarter by adding more manufacturing capacity and staff to make sure it can meet customer needs, McGinn said. Despite its slow start in the first quarter, McGinn reiterated that Lucent expects to increase its full-year revenues by 17 percent. ``We're going to grow in the current quarter, that's the starting point, and you ramp up from there,' McGinn said.