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Lucent profits slip 23%
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January 20, 2000: 5:56 p.m. ET
Telecom equipment maker cites manufacturing and customer issues
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NEW YORK (CNNfn) - Lucent Technologies Inc. posted a 23 percent drop in profit for its fiscal first quarter Thursday, falling a penny short of Wall Street's already lowered expectations.
The telecom equipment maker -- which issued a rare warning two weeks ago that it would fall well short of estimates -- earned $1.17 billion, or 36 cents per diluted share, excluding one-time items, for the three months ended Dec. 31. That compares with profits of $1.52 billion, or 48 cents per share, in the year-ago quarter.
Analysts surveyed by earnings tracker First Call predicted the company to earn 37 cents a share, and prior to Lucent's profit warning analysts had expected earnings of about 54 cents a share for the quarter.
Lucent blamed the earnings shortfall on manufacturing restraints and changes in its customers' purchasing patterns. However, CEO Richard McGinn said the company expects its manufacturing and production issues to be resolved by the end of the second half of the fiscal year.
"We're disappointed with our results for the quarter," McGinn said in a statement. "However, industry growth is strong, and we are well positioned to take advantage of that growth."
The shortfall marked the first time Lucent has missed analysts' expectations since AT&T (T) spun off the company four years ago.
Shares in Lucent, the most widely held stock in the United States, dropped 22 percent Jan. 7 after the Murray Hill, N.J.-based company said that its profits would dip well below forecasts. The stock had hit as high as 84-3/16 in December.
The fiscal first-quarter results were released after Thursday's market close. In composite trading on the New York Stock Exchange, Lucent (LU) stock was up 1-1/16 at 52-1/2.
Including one-time items, Lucent earned $1.25 billion, or 38 cents per share in the first quarter. The company recorded a $115 million after-tax gain associated with the sale of an equity investment and took a $40 million after-tax charge for merger expenses.
First-quarter revenues totaled $9.9 billion, up from $9.8 billion. Revenues from service-provider networks fell 2 percent from the year-ago quarter to $6.2 billion, as the company failed to produce optical networking and fiber optic products quickly enough to keep up with customer demand.
The quarterly results were "a mixed bag," said David Heger, a technology analyst at brokerage firm A.G. Edwards. While the profit results were at the lower end of the company's revised forecast, the revenues were at the higher end, he said.
Heger, who has a "buy" rating on Lucent stock, said that the performance of the company's shares will hinge on whether Lucent can rebound in the second half. He has a 12-month price target of $76 per share on the stock.
"Probably for the next six months, the stock may continue to be pretty flat near this (current) level until management restores confidence that their earnings are coming through in the third and fourth fiscal quarters," he said. 
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Lucent Technologies
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