Ponderous WSJ writer finally finished last year's report:
Lucent's Earnings Beat Estimates For Fiscal Fourth-Quarter, Year
By REBECCA BLUMENSTEIN
Staff Reporter of THE WALL STREET JOURNAL
NEW YORK -- Despite fears of a cooling telephone equipment market, Lucent Technologies Inc. beat Wall Street's expectations for its fiscal fourth quarter and year, as it has done each period since it was spun off from AT&T Corp. in 1996.
The Murray Hill, N.J., telecommunications-equipment maker said it earned $388 million, or 29 cents a diluted share, in the quarter ended Sept. 30, compared with a year-earlier loss of $597 million, or 47 cents a share. The year-ago quarter included an after-tax charge of $966 million for Lucent's acquisition of Octel Communications Corp., a messaging concern.
Philips Electronics, Lucent Will End Loss-Making Mobile-Phone Venture
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Company Profile: Lucent
Excluding one-time charges, Lucent's net income for the quarter increased 49% to $548 million, or 41 cents a share, compared with a year-earlier profit of $369 million, or 28 cents a share. According to First Call, analysts' consensus was for earnings of 39 cents a share. Helped by healthy growth in orders across all segments -- including its international operations -- revenue rose 16% to $8.03 billion from $6.93 billion.
"They were able to grow about 20% for the quarter while we hear about [regional bell operating companies'] spending being flat," said Kenneth A. Leon, an analyst with ABN-Amro Inc. "This is kind of like the New York Yankees. They are deep in talent and their organization is relentless to win."
Along with its results, Lucent announced a major strategic move. As expected, Lucent moved to end its struggling joint venture with Philips Electronics NV, taking a $110 million charge as Lucent moves to put its remaining consumer phone-equipment operations -- including the manufacture of corded and cordless phones and answering machines -- up for sale and to shut down its fledgling cellular handset operations.
Richard A. McGinn, Lucent's chairman and chief executive, said the unraveling of the joint venture officially ends Lucent's involvement in the consumer end of the equipment business, which it inherited from AT&T and its former Western Electric unit. "We are not interested in being a consumer brand. We want to stay focused on business to business," Mr. McGinn said.
Lucent's stock fell 56.25 cents to close at $78.4375 in composite trading on the New York Stock Exchange.
Lucent also announced that it has entered into a long-term relationship with Winstar Communications Inc. that will allow Winstar to expand its "fixed wireless" network to 100 markets world-wide, from 40 currently. Lucent will provide as much as $2 billion to finance construction of the high-capacity network, billed as the world's first such global end-to-end system. The financing won't be allowed to exceed $500 million at any one time.
Lucent officials said the deal will allow it to design and build a network using so-called broadband technology that could become a dominant force in years to come, while Winstar officials say the deal positions them to break out of the pack of competitive local exchange carriers.
Such vendor financing may become an increasingly important tool for carriers such as Winstar. These companies had relied heavily on high-yield debt to finance construction of their local networks. Now that this junk-bond financing has dried up, these carriers may have to turn to vendor financing and private equity to preserve cash and continue with their construction plans.
For the full fiscal year, Lucent earned $970 million, or 73 cents a diluted share, an increase of 79%, compared with year-earlier results of $541 million, or 42 cents a diluted share. Excluding the one-time charge from the Octel purchase, annual net income jumped 52% to $2.29 billion, or $1.72 a share, compared with the year-ago $1.50 billion, or $1.17 a share. Revenue increased 14% to $30.14 billion from $26.36 billion.
Lucent officials said they are continuing to make progress on cost-cutting as well as growth, having reduced administrative and overhead expenses to 22.7% of revenue in the quarter, from 23.2% a year ago. Company officials said they are halfway toward meeting their goal of cutting such expenses by 8%, but added that the second half will be harder to achieve.
Lucent officials said more than 7,000 of the 8,500 Lucent employees involved in the Philips joint venture work at a phone equipment-manufacturing plant in Mexico that will be put up for sale. About 600 are involved in the cellular-phone operation that will be closed down, they said.
The venture was owned 60% by Philips, the Dutch electronics giant, and 40% by Lucent. It was conceived as an effort for the companies to become leaders in the cellular-handset business, but was expected to show a loss of about $500 million this year on sales of $2.5 billion.
-- Martin Du Bois contributed to this article. |
