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Lucent warns on 4Q
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October 10, 2000: 4:21 p.m. ET
Telecom equipment maker again says profit to disappoint Wall Street
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NEW YORK (CNNfn) - Lucent Technologies warned Tuesday that it expects earnings for its fiscal fourth quarter to fall short of analysts' estimates, marking the company's third profit warning this year and the latest disappointing earnings news from a major technology firm.
The Murray Hill, N.J.-based company said operating earnings for the July-September quarter should fall in the range of 17 cents-to-18 cents per share, down about 30 percent from a profit of 24 cents per share in the year-ago period. Analysts had expected earnings of 27 cents per share, according to the First Call consensus estimate.
The telecom equipment maker, reiterating a late July warning, cited disappointing revenue in its optical systems business, lower-than-expected results from its circuit switching unit, and an increase in its reserves for bad debt. Results for the current 2001 fiscal first quarter also will be affected, the company said.
Lucent's Chief Executive Officer Rich McGinn told analysts during a conference call Tuesday that the company attributed the lower sales in its optical systems business to its being slow to market with the products.
He added that larger telecom customers have been slow to pick up on optical systems, equipment which allows for high speed voice and data transmission. McGinn said that smaller companies with doubtful credit have snapped up much of the optical systems products, but their bad credit has impacted on Lucent's earnings.
The company declined to provide analysts with revised figures on its reserve for bad credit.
The dismal growth outlook now puts additional pressure on Lucent's chairman, Rich McGinn, whose status at the company was already seen as precarious, analysts said.
"The word on the street was that they would miss the quarter, and if they did, that McGinn's head may finally roll," said one industry analyst who declined to be named.
Lucent had recently retained executive search firm Korn/Ferry International to find a replacement for McGinn, the analyst said. Lucent declined to comment.
Revenue for the fourth quarter is expected to total about $9.3 billion-to-$9.4 billion, a 14-to-15 percent increase over year-earlier results. Revenue from optical networking systems fell about 5 percent while switching systems revenue was off about 13 percent.
Telecom analyst David Heger, of A.G. Edwards, said Lucent's latest warning likely will take its toll on the company's already beaten-up stock, which has fallen nearly 60 percent this year, as well as the company's credibility.
"I think this is really going to hurt the company's reputation in the market, and has really torn apart the company's credibility at this point," Heger told CNNfn's "Street Sweep."
 The news was released after Tuesday's market close. In after-hours trading, Lucent (LU: Research, Estimates) stock slid more than 20 percent, dropping $6.63 to $24.75, after finishing the day down 94 cents at $31.38 per share on the New York Stock Exchange.
Lucent is one of the most widely held stocks in the United States. Its shares have sunk about 58 percent this year.
In January, Lucent stock sustained a 28 percent one-day plunge after disclosing that earnings would fall short of revenue targets for the fiscal second quarter. On Jan. 7 Lucent lost $48.1 million, or 21.9 percent, in market capitalization with its warning.
Results for the latest quarter will be released Oct. 24. 
-- from staff and wire reports
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Lucent
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