News April 22, 07:25 Eastern Time
LUCENT TECHNOLOGIES NET INCOME MORE THAN DOUBLES
In Second Fiscal Quarter 1999, Excluding One-Time Events
- Revenues Up 33 Percent to $8.220 Billion
MURRAY HILL, N.J., April 22 /PRNewswire/ -- Lucent Technologies (NYSE: LU) today reported that net income more than doubled to $457 million or 17 cents a share(1) for the second fiscal quarter ended March 31, 1999, excluding one-time events (see Note A). Net income for the year-ago quarter was $186 million or 7 cents a share, also excluding one-time items (see Note B). Revenues increased 33 percent to $8.220 billion, compared with $6.184 billion in the year-ago quarter. (2)
"This was an extremely strong quarter for Lucent both inside and outside the U.S. and across our businesses, as the company added more than $2 billion to the top line," said Richard McGinn, Lucent Technologies' chairman and chief executive officer. "And our momentum continues," McGinn said, noting that since the end of the first fiscal quarter, Lucent has announced more than $4 billion in new business.
"Unprecedented demand for network capacity among both established and emerging service providers worldwide, the accelerated build-out of next-generation broadband networks and strong demand for our advanced communications semiconductors are propelling Lucent into a period of continued growth," McGinn said.
McGinn reiterated that Lucent is on track to increase revenues by 19 to 20 percent in fiscal 1999 and earnings per share by about 35 percent, excluding one-time events.
For the fiscal second quarter, including a one-time, after-tax charge of $15 million (1 cent a share) associated with the acquisitions of WaveAccess, Sybarus and the Ethernet LAN business of Enable Semiconductor (see Note A), the company reported net income of $442 million or 16 cents a share. In the year-ago quarter, the company reported net income of $29 million or 1 cent a share, including a $157 million one-time, after-tax charge associated with the acquisition of Prominet.
For the first six months of fiscal 1999, net income increased 41.4 percent to $1.899 billion or 69 cents a share, excluding one-time events (See Note D). Revenues were $17.484 billion, an increase of 17 percent from the same period a year ago.
Review of Operations
SYSTEMS FOR NETWORK OPERATORS
Revenues increased by 40 percent over the year-ago quarter to
$5.149 billion, driven by sales of wireless systems, optical networking
systems, data networking systems for service providers, switching
systems, communications software and services.
Revenues were led by sales to RBOCs (Regional Bell Operating Companies), competitive local exchange carriers, wireless service providers and long distance carriers. Continued strong demand for data services and Internet access in businesses and residences drove the group's revenues.
Within the U.S., revenues increased 28 percent over the year-ago quarter. Revenues outside the U.S. increased about 83 percent and represented approximately 28 percent of the group's revenues.
BUSINESS COMMUNICATIONS SYSTEMS
Revenues increased 15 percent versus the year-ago quarter to
$1.987 billion. The group's results were primarily driven by sales of
the Definity(R) Enterprise Communications Server to large businesses --
including those with call center applications, sales of messaging
systems and NetCare(R) services.
Within the U.S., revenues increased 10 percent over the year-ago quarter. Revenues outside the U.S. increased about 34 percent and represented approximately 23 percent of the group's revenues.
Separately today, in order to more effectively reach its customers, Lucent is announcing it will sell its U.S. sales division for small and mid-sized businesses to a newly formed company dedicated to serving the full range of communications needs for this market. Following the sale, this group will serve as an indirect sales channel for Lucent. Lucent will continue to maintain the largest direct sales and service force in the industry for its large enterprise customers.
MICROELECTRONIC PRODUCTS
Revenues increased 21 percent over the year-ago quarter to $851
million, driven by sales of optoelectronics components and customized
chips for high performance communications, data networking and
computing. Increased revenues from power systems also contributed to
the group's revenues.
Within the U.S., revenues increased 5 percent over the year-ago quarter. Revenues outside the U.S. increased about 37 percent and represented approximately 56 percent of the group's revenues.
Lucent's core semiconductor revenues increased 21 percent in the quarter. According to a recent Dataquest report, Lucent was the fastest-growing large semiconductor company in the world in 1998.
Revenues from Other Systems and Products increased to $233 million from $68 million in the year-ago quarter mainly due to the consolidation of businesses regained from the PCC venture.
COSTS AND EXPENSES
As a percentage of revenue, gross margin for the quarter improved
to 47.4 percent from 44.4 percent in the year-ago quarter, reflecting a
more favorable mix of products and improved performance of multi-year
contracts.
Selling, general and administrative expenses (SG&A) accounted for 23.1 percent of revenues in the quarter, compared to 24.3 percent in the period a year-ago.
Research and development (R&D) spending, excluding one-time charges, increased 22 percent over the year-ago quarter due to investments in high growth areas such as wireless, data networking, optical networking, switching and microelectronics. As a percentage of revenues, quarterly R&D spending decreased to 13.9 percent from 15.1 percent during the 1998 period.
Net income for the quarter, excluding one-time charges, was driven by revenue growth, higher gross margins, and by a decrease in the company's effective tax rate to 34 percent, compared to 35.4 percent in the year-ago quarter.
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.
This news release contains forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include price and product competition, dependence on new product development, reliance on major customers, customer demand for our products and services, readiness for Year 2000, control of costs and expenses, international growth, general industry and market conditions and growth rates and general domestic and international economic conditions including interest rate and currency exchange rate fluctuations. For a further list and description of such risks and uncertainties, see the reports filed by Lucent with the Securities and Exchange Commission. Lucent disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
(1) All earnings per share reported in this release are diluted EPS
figures and reflect the effect of a two-for-one stock split effective
April 1, 1999. On a pre-split basis, earnings per share for the
quarter ended March 31, 1999 would have been 33 cents a share,
excluding one-time events.
(2) All items in both the 1998 and 1999 periods include the results of
recently acquired Kenan Systems, which was accounted for as a pooling
of interests.
LUCENT TECHNOLOGIES
Second Quarter Income Statement
(Unaudited; Millions of Dollars, except per share amounts)
For the Three Months Ended
03/31/99 03/31/99(a) 03/31/98(b) Change(c)
Revenues 8,220 8,220 6,184 32.9%
Costs 4,327 4,327 3,436 25.9%
Gross Margin 3,893 3,893 2,748 41.7%
Selling, General and
Administrative 1,902 1,902 1,501 26.7%
Research and
Development 1,157 1,139 932 22.2%
Total Operating
Expenses 3,059 3,041 2,433 25.0%
Operating Income 834 852 315 170.5%
Other Income (expense),
net (65) (65) 31 nm
Interest expense 95 95 58 63.8%
Income before income
taxes 674 692 288 140.3%
Income tax expense 232 235 102 130.4%
Net Income 442 457 186 145.7%
Earnings per share
- Basic 0.17 0.17 0.07 142.9%
Earnings per share
- Diluted 0.16 0.17 0.07 142.9%
Effective tax rate (%) 34.4 34.0 35.4 (1.4) pts.
(a) Excludes a one-time, after-tax charge of $15 million for purchased
in-process research and development related to the Company's
acquisitions of WaveAccess, Sybarus, and Enable Semiconductor's
Ethernet LAN business.
(b) Excludes a one-time, after-tax charge of $157 million for purchased
in-process research and development related to the Company's
acquisition of Prominet Corporation.
(c) Change between the three-month period ending 3/31/99, excluding a
one-time charge related to the Company's acquisitions of WaveAccess,
Sybarus, and Enable Semiconductor's Ethernet LAN business, and the
three-month period ending 03/31/98, excluding a one-time charge
related to the Company's acquisition of Prominet.
(d) For the six months ended March 31, 1999, results exclude the
in-process research and development charges associated with the
acquisitions of Quadritek, WaveAccess, Sybarus, and Enable
Semiconductor's Ethernet LAN business as well as the cumulative
effect of accounting change related to the Company's pension and
postretirement benefits. For the six months ended March 31, 1998,
results exclude the in-process research and development charges
associated with the acquisitions of Livingston and Prominet as well
as the gain on the sale of the Company's Advanced Technology Systems
(ATS) business.
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