Lucent 1st-Qtr Profit Rises 26% Though Sales Lag
Murray Hill, New Jersey, Jan. 21 (Bloomberg) -- Lucent Technologies Inc., the top telephone-equipment maker, said fiscal first-quarter earnings rose a better-than-expected 26 percent though a delay in recording sales cut into revenue.
Profit before a charge and a gain for the period ended Dec. 31 climbed to $1.41 billion, or $1.05 a share, from $1.12 billion, or 86 cents, in the 1997 period. Revenue rose a less- than-forecast 6 percent to $9.2 billion as more than $800 million in sales came in too late to be recorded in the quarter.
Phone companies are buying Lucent's equipment to update their networks for Internet and data traffic. While Lucent's profit has topped expectations every quarter since the company's split from former parent AT&T Corp., some investors were concerned that the delayed sales may indicate slowing demand. Lucent denied that contention.
''Any time you see a shortfall in revenue, there's concern,'' said Bradley Williams, an analyst at Legg Mason Wood Walker Inc., who rates Lucent ''outperform.''
Lucent fell 5 to 110 1/2 in early trading of 1.1 million. The company was expected to earn $1.01 a share, the average estimate of analysts surveyed by First Call Corp.
No Weakness
Chief Executive Richard McGinn said on a conference call this morning that Lucent delivered the $800 million of equipment, though the company couldn't report the revenue because of delays in completing the paperwork.
''It would be a mistake to read it (the delay) as any weakness in our business,'' McGinn said.
The carried-over sales will help boost second-quarter revenue 30 percent and double Lucent's earnings from the 14 cents a share it reported in the fiscal 1998 second quarter.
Murray Hill, New Jersey-based Lucent expects fiscal 1999 sales to rise 19 percent to 20 percent and per-share earnings to jump 35 percent, McGinn said.
Lucent has benefited as more companies update their phone networks and look for a big provider like Lucent for all the equipment they need. The company, with about 55 percent of the North American phone-equipment market, is in a race with rivals like Northern Telecom Ltd. to provide a full range of products.
''Lucent's the 900-pound gorilla in this industry, and it's really benefiting them,'' said Jeffrey Heil, director of equity investments at the University of California, which owns 6.31 million Lucent shares.
Last week, Lucent agreed to buy No. 4 networking-equipment maker Ascend Communications Inc. for $21.7 billion to expand its products. The purchase is expected to be completed by June 30. Ascend fell 5 5/16 to 84 5/8.
Sales
Sales in Lucent's division that makes systems for network operators rose 3 percent to $6.12 billion, driven by switches and data-networking equipment that direct traffic on networks, as well as optical gear that boosts capacity.
The gains were led by sales to large U.S. and international phone companies. Still, U.S. sales dropped 19 percent because of orders that were delayed to the second quarter.
''The earnings were great, but the revenue was really light,'' said Steven Levy, an analyst at Lehman Brothers Inc., who rates Lucent ''neutral.''
Sales outside the U.S. climbed 67 percent and accounted for 42 percent of the group's overall revenue.
Revenue at Lucent's computer-chip division gained 6 percent to $821 million led by sales overseas, which jumped 20 percent and accounted for 55 percent of the group's total revenue. Sales in the U.S. dropped 8 percent.
Sales of Lucent's main chip products gained 18 percent.
In the business communications systems group, which sells equipment to big companies, sales rose 2 percent to $1.98 billion. U.S. sales gained 3 percent, while sales abroad fell 2 percent and accounted for 18 percent of the group's total revenue.
Expenses
The company's gross margin widened to 52 percent from 48 percent in the 1997 period on sales of more profitable software and data networking and optical equipment.
McGinn said the company expects a gross margin for the year in the ''high 40s.''
Selling, general and administrative expenses were 19 percent of sales, up from 18 percent in the 1997 period. The company's tax rate dropped to 34 percent from 36 percent.
After a gain of $1.31 billion, or 96 cents a share, for an accounting change associated with company's pension program and a charge of $14 million, or 1 cent, Lucent had net income of $2.71 billion, or $2 a share.
The company said the accounting change boosted profit before the charge and gain by $65 million, or 5 cents a share.
In the earlier quarter, after a charge of $427 million, or 33 cents a share, for the purchase of Livingston Enterprises Inc. and a gain of $95 million, or 7 cents, for the sales of Advanced Technology Systems, Lucent had net income of $792 million, or 61 cents a share.
10:07:06 01/21/1999
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