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Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: DHB who wrote (17723)	2/20/2001 9:13:58 PM
From: Kenneth E. Phillipps	Read Replies (1) \| Respond to of 21876

Lucent's Agere May Record `Significant' 2nd Qtr Loss (Update8) By Miles Weiss Washington, Feb. 20 (Bloomberg) -- Agere Systems Inc., the Lucent Technologies Inc. unit whose planned initial stock sale is expected to be the second-biggest in U.S. history, may record a ``significant'' operating loss in the fiscal second quarter as customers cancel orders. Agere, Lucent's fastest-growing business, said in a filing that it expects sales to fall in the second quarter, ending March 31, from the first. Agere makes semiconductors for communications equipment and components used in fiber-optic networking gear. The company's IPO comes as many customers and rivals slash sales and profit forecasts. Facing a weaker U.S. economy, telecommunications companies are spending less on the networking equipment made by Lucent and Nortel Networks Corp. The slowdown also cut demand for lasers, chips and parts used in the gear. ``This has to be one of the worst possible times to do an IPO,'' said Walter Casey, an analyst with Banc One Investment Advisors Inc. ``They have a tough road ahead here.'' The company narrowed the price at which it will sell shares to $16 to $19 from a $15-to-$20 range it set this month, according to the filing at the Securities and Exchange Commission. Allentown, Pennsylvania-based Agere will offer 222.7 million Class A shares in the IPO, set to occur by the end of March. Morgan Stanley Dean Witter & Co., the underwriter, will offer as many as 147.7 million shares, a stake it will obtain in exchange for Lucent debt. Lucent will distribute its remaining Agere stake to shareholders by Sept. 30. Slack Demand Agere said it's experiencing slack demand for its products from ``a number of our large customers,'' which include Lucent, Nortel and Motorola Inc. These companies probably will look to reduce inventories of chips and optical components ``in response to weakness in their markets,'' the filing said. ``It's not encouraging,'' said Bill Burt, an analyst with Eaton Vance Management Inc., which owns Lucent shares. Agere's customers ``are cyclical growth companies, and these are not good times.'' Lucent shares slid 33 cents to $12.34 on the New York Stock Exchange. They've tumbled 75 percent in the past year. Shares of Avaya Inc., the No. 1 U.S. maker of corporate phone equipment, have fallen 38 percent since the company's spin off from Lucent on Sept. 30. Agere's sales fell to $1.36 billion for the fiscal first quarter ended Dec. 31, from $1.49 billion for the fourth quarter ended Sept. 30, according to a registration statement filed with the Securities and Exchange Commission. Revenue from Agere's optical components business rose to $424 million for the first fiscal quarter of 2001 from $393 million during the fourth quarter. Semiconductor sales fell to $938 million in the first quarter of 2001 from $1.09 billion in the fourth quarter of 2000. Gross Profit Gross profit, calculated after deducting the direct costs of revenue, declined to $574 million in the first fiscal quarter of 2001 from $715 million in the fourth quarter of 2000. As a result, gross profit as a percentage of revenue, otherwise known as gross margin, fell to 42.1 percent in the first quarter from 48 percent in the fourth quarter. Agere said the decline in revenue would trigger a drop in operating income, which includes amortization of goodwill and other acquired intangibles. This may result in the significant operating loss for the second quarter, the filing said. Agere had reported an operating loss of $3 million for the first fiscal quarter after deducting $111 million for the amortization of goodwill and other intangibles. The company also had an operating loss of $286 million for the third quarter ended June 30, 2000, which included a one-time expense of $435 million for research and development projects the company inherited through acquisitions of other businesses. The company also said it expects inventories to rise in the second fiscal quarter as a result of rescheduled delivery dates for products that have already been made.