"...the accounts receivable and inventory numbers need to come down..."
Lucent 2nd-Qtr Profit More Than Doubles as Sales Rise (Update9)
Lucent 2nd-Qtr Profit More Than Doubles as Sales Rise (Update9) (Adds comments from CEO. Updates with closing share price.)
Murray Hill, New Jersey, April 22 (Bloomberg) -- Lucent Technologies Inc., the world's No. 1 phone-equipment maker, said fiscal second-quarter earnings more than doubled and sales rose by a third as customers spent more to improve their networks.
Profit from operations rose to $457 million, or 17 cents a share, in the quarter ended March 31, from the year-earlier $165 million, or 6 cents. Analysts expected profit of 15 cents, the average estimate from First Call Corp.
Sales rose to $8.22 billion. The increase dispelled concerns that Lucent would repeat its first-quarter disappointment, when sales lagged forecasts for the first time. Lucent shares, which have surged ninefold since the company's 1996 initial public offering, rose just 7.6 percent this year before today's report. ''People are going to be excited about the growth in revenue,'' said Paul Sagawa, an analyst at Sanford C. Bernstein & Co., who rates Lucent ''outperform.'' ''You're not going to find too many companies the size of Lucent that can deliver this kind of performance.''
Lucent rose 2 5/8 to 61 3/4 in trading of 17.5 million shares, making it the ninth-most active U.S. stock.
Separately, Lucent said it will sell its sales division for small and medium-sized businesses, which has about 2,000 employees, to a new company led by former employee Susan Mandl for an undisclosed price. The company will announce its new name when the sale is completed in June.
Lucent said the sales team will become an indirect seller of Lucent products.
Sales
Murray Hill, New Jersey-based Lucent is benefiting from demand for software, optical, wireless and data-networking products as phone companies like former parent AT&T Corp. buy equipment to carry data, cellular and Internet traffic. Last month, Lucent won a $1 billion four-year contract from AT&T for digital cellular gear.
Sales in Lucent's Systems for Network Operators unit, which serves large phone companies, gained 40 percent to $5.15 billion. Sales inside the U.S. rose 28 percent, while revenue from international carriers surged 83 percent. ''The carrier business was phenomenal,'' said Walt Piecyk, an analyst at PaineWebber Inc., who rates Lucent ''buy.''
Carly Fiorina, who heads the global service provider business, said Lucent is gaining against rivals such as Cisco Systems Inc. ''We believe we are taking share in every region of the world and in each of the product areas where we've chosen to focus,'' she said in an interview.
Corporate Customers
The Business Communications Systems division, which serves corporate customers, boosted sales 15 percent to $1.99 billion. Sales of semiconductors rose 21 percent to $851 million.
Chairman and Chief Executive Richard McGinn said the corporate sales growth was slower than expected as companies delayed purchases to focus on fixing Year 2000 problems that could cause their computers to malfunction Jan. 1.
Total international sales rose 61 percent to $2.37 billion.
McGinn reiterated Lucent's forecast for fiscal 1999 profit to rise 35 percent on sales gains of 19 percent to 20 percent. ''We haven't even begun to see a decline in terms of either the market or of any kind of consolidation that would say we can't grow further,'' McGinn said in an interview.
Accounts Receivable
Lucent's accounts receivable, or the amount customers owe, decreased to $8.75 billion from $9.19 billion in the fiscal first quarter. The amount of inventory Lucent has on hand rose to $4.33 billion from $3.79 billion the previous quarter.
Lucent said it's ramping up inventory for orders that will be shipped in the next two quarters. During the quarter, Lucent unveiled contracts valued at more than $4 billion, including orders from AT&T and Sprint PCS.
Even so, some analysts said the accounts receivable and inventory numbers need to come down. ''They need to collect their bills on a timely basis,'' analyst Sagawa said.
Lucent said it's working to integrate collections more closely with its sales systems.
In the fiscal first quarter, Lucent missed sales forecasts by about $800 million because its sales team failed to deliver paperwork the accountants needed in time to book some orders.
Expenses
The company's gross margin, or profit as a percentage of sales after production costs, widened to 47.4 percent from 44.4 percent a year earlier. Selling, general and administrative expenses narrowed to 23.1 percent of sales from 24.3 percent.
After a charge of $15 million, or 1 cent a share, for the acquisitions of Wave Access, Sybarus and an Enable Semiconductor unit, Lucent had net income $442 million, or 16 cents.
Year-earlier revenue is adjusted to reflect Lucent's $1.45 billion acquisition of closely held Kenan Systems Corp. Without Kenan, Lucent reported $6.16 billion in sales.
In the year-earlier period, the company had a charge of $157 million, or 6 cents a share, for the acquisition of Prominent and a gain from an accounting reserve reversal of $21 million, or 1 cent. Net income was $29 million, or 1 cent. |
