Lucent Technologies Net Income More Than Doubles in Third Fiscal Quarter 1998, Excluding One-time Charges
MURRAY HILL, N.J.--(BUSINESS WIRE)--July 22, 1998--
Revenues Up 19.2 Percent On Continuing Operations
Lucent Technologies today reported that net income more than
doubled to $435 million, or 32 cents a share(1) for the third fiscal
quarter ended June 30, 1998, excluding one-time charges. Net income
for the year-ago quarter was $213 million or 17 cents a share.
The company's revenues for the quarter were $7.228 billion, an
increase of 19.2 percent on continuing operations(2) and 14 percent on
the consolidated business, compared with the year-ago quarter when
revenues were $6.340 billion.
Including one-time, after-tax charges of $620 million and $48
million, respectively, for in-process research and development
associated with the acquisitions of Yurie Systems, a leader in ATM
access data networking technology, and Optimay, a developer of GSM
cellular phone software, the company reported a net loss of $233
million for the quarter or 17 cents a share. The results for the
quarter include a $50 million, pre-tax (or $32 million, after-tax)
reversal of business restructuring charges,(3) which were recorded in
December 1995.
"This was another quarter of solid growth," said Richard McGinn,
Lucent Technologies chairman and chief executive officer. "More
importantly, we're building momentum as we accelerate Lucent's
investment in technologies that will shape communications networks for
the next millennium."
Within Lucent Technologies, revenues for systems for network
operators increased 16.6 percent to $4.408 billion, revenues for
business communications systems increased 28 percent to $1.995
billion, and revenues for microelectronic products increased 7.1
percent to $736 million.
For the nine months ended June 30, 1998, net income increased 52.8
percent to $1.739 billion, or $1.31 a share, excluding one-time
charges related to the company's acquisitions of Livingston
Enterprises, Prominet Corporation, Yurie Systems, and Optimay, as well
as the gain on the sale of its former Advanced Technology Systems
business. The net income and earnings per share figures include $83
million in pre-tax reversals of business restructuring charges ($53
million after-tax). Net income on a reported basis was $1.138 billion,
or 89 cents a share, for the nine months ended June 30, 1997.
Revenues for the nine months ended June 30, 1998 were $22.109
billion, an increase of 19.4 percent on continuing operations and 13.8
percent overall. For the same period in fiscal 1997, total revenues
were $19.427 billion.
Review of Operations - Three Months Ended June 30, 1998
SYSTEMS FOR NETWORK OPERATORS
Revenues increased by 16.6 percent over the year-ago quarter to
$4.408 billion, led by sales of switching, wireless and data
networking systems for service providers.
Revenues were led by sales to RBOCs (Regional Bell Operating
Companies), competitive local exchange carriers, wireless service
providers and long distance carriers. The 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 28 percent
and represented approximately 23 percent of the group's revenues.
BUSINESS COMMUNICATIONS SYSTEMS
Revenues increased 28 percent to $1.995 billion compared to the
year-ago quarter. The group's results were primarily driven by sales
of the Definity(R) Enterprise Communications Server to large
businesses, 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 24 percent over the
year-ago quarter. Revenues outside the U.S. increased about 46 percent
and represented approximately 18 percent of the group's revenues.
MICROELECTRONIC PRODUCTS
Revenues increased 7.1 percent over the year-ago quarter to $736
million, driven by sales of customized chips for communications and
computing, including components for wireless telephones, local area
networks, data networking, and high-end computer workstations.
Increased revenues from power systems and optoelectronic components
also contributed to the increase.
Within the U.S., revenues increased by approximately 9 percent
over the year-ago quarter, led by sales to communications, data
networking and optoelectronics customers. Revenues outside the U.S.
increased about 6 percent and represented approximately 51 percent of
the group's revenues.
COSTS AND EXPENSES
As a percentage of revenue, gross margin for the quarter improved
to 45.4 percent from 41 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
21.7 percent of revenues in the quarter, compared to 22.1 percent in
the period a year-ago.
As a percentage of revenue, research and development spending(4)
for the quarter increased to 13.1 percent from 12.9 percent during the
1997 period, due to investments in high growth areas such as wireless,
data networking, optical networking, and switching and access.
Excluding one-time charges, net income for the quarter was driven
by revenue growth, higher gross margins, and by a decrease in the
company's effective tax rate to 36 percent, compared to 38.1 percent
in the year-ago quarter.
MAJOR ANNOUNCEMENTS
During the quarter, Lucent unveiled an extensive portfolio of
Internet Protocol (IP) products for service providers that promises to
revolutionize the way data, voice and video are handled in today's
evolving networks. The portfolio is led by a highly reliable IP
routing switch that will allow service providers to guarantee
bandwidth and set prices for various levels of data service.
"The voice and data worlds are rapidly converging," said McGinn.
"We're positioned to lead this revolution by ensuring tomorrow's
broadband networks not only have speed and unprecedented bandwidth but
also the features, reliability and manageability customers have come
to expect from today's voice networks."
McGinn stated that "Lucent continues to seize opportunities in
the fastest-growing markets of the rapidly expanding communications
networking industry."
Major announcements since the end of the fiscal second quarter
included the following:
-- Lucent entered into a five-year strategic agreement with SBC
Communications valued at up to $2.4 billion for state-of-the-art
switching telecommunications equipment to be deployed throughout
SBC's seven-state territory. The contract includes Lucent's
flagship 5ESS(R)-2000 AnyMedia(R) Switch, the industry's most
reliable switch according to analysis of a Federal Communications
Commission (FCC) quality report released in April.
-- In data networking, Lucent acquired Yurie Systems and announced
plans to acquire LANNET, a leader in next-generation local area
network switching technology. Lucent was also awarded a $200
million contract to help Bell Atlantic build a next generation
data network to carry both voice and data services.
-- In wireless, Sprint PCS selected Lucent to build part of the next
phase of its U.S. nationwide digital wireless network. The
contract, which is in addition to the initial $1.8 billion
contract for the first phase of Sprint PCS's network, is worth up
to $700 million over 3 years. Just yesterday, Lucent announced
contracts with Saudi Telecommunications Co. valued at $810 million
in GSM wireless ($699 million) and switching ($111 million).
-- In optical networking, CTR Group chose Lucent to be the exclusive
provider of land-based optical networking equipment for Project
Oxygen, a planned global undersea fiber optic cable network, that
will span every continent but Antarctica. Lucent expects sales of
optical networking equipment, network management systems and other
related products and services to Project Oxygen to reach $1
billion over four years.
-- In microelectronics, Lucent formed an alliance with Motorola to
develop next-generation Digital Signal Processor (DSP) technology
to enable manufacturers to develop new products ranging from
hand-held wireless devices for accessing the Internet to cell
phones with video capability.
-- Targeting the fast-growing European market for call centers,
Lucent acquired SDX Business Systems plc, one of the U.K.'s
leading providers of business communications systems.
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.
(1) 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.
(2) Includes revenues for Lucent's Systems for Network Operators,
Microelectronic Products and Business Communications Systems
businesses (including the recently acquired Octel Communications
and Livingston Enterprises), 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 nine months ended June 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.
(3) The $50 million (pre-tax) reversal of business restructuring
reserves was recorded as $19 million to Costs, $23 million to
SG&A, and $8 million to R&D expense.
(4) Excludes one-time charges of $620 million for in-process R&D
associated with the acquisition of Yurie Systems and $48 million
associated with the acquisition of Optimay.
Third Fiscal Quarter Income Statement
(Unaudited; Millions of Dollars, except per share amounts)
For Three Months Ended
6/30/98 6/30/98(a) 6/30/97 Change(b)
Revenues 7,228 7,228 6,340 14.0%
Costs 3,949 3,949 3,740 5.6%
Gross Margin 3,279 3,279 2,600 26.1%
Selling, General and
Administrative 1,566 1,566 1,404 11.5%
Research and Development 1,615 947 816 16.1%
Total Operating Expenses 3,181 2,513 2,220 13.2%
Operating Income 98 766 380 101.6%
Other Income (Expense), net (7) (7) 41 (117.1)%
Interest expense 79 79 77 2.6%
Income before income taxes 12 680 344 97.7%
Income tax expense 245 245 131 87.0%
Net Income (Loss) (233) 435 213 104.2%
Earnings (Loss) per share--Basic (0.18) 0.33 0.17 94.1%
Earnings (Loss) per share --
Diluted (0.17) 0.32 0.17 88.2%
Effective tax rate (%) nm% 36.0% 38.1% (2.1)
related to the acquisitions of Optimay and Yurie Systems.
(b) Change is between the three-month period ended 6/30/98, excluding
one-time charge related to the acquisitions of Optimay and Yurie
Systems, and the corresponding 1997 period.
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