NEW YORK (CNN/Money) - Is Lucent finally on the comeback trail? Investors at the company's annual shareholder meeting Wednesday do have some things to, if not celebrate, at least be mildly happy about.

The troubled telecom equipment company reaffirmed Tuesday that sales in its current quarter should increase 20 percent sequentially. And CEO Patricia Russo, who was named to the additional role of chairman Wednesday, replacing Henry Schacht, said that the company should return to profitability by the end of this fiscal year.

Few are worried about bankruptcy anymore. And the stock has surged more than 200 percent since its mid-October lows. (Granted, that's from 58 cents a share to the $1.79 reached at Tuesday's close of trading.)

Still, Lucent (LU: up $0.01 to $1.78, Research, Estimates) is far from a screaming buy. Despite this quarter's rosy outlook, analysts expect Lucent to post a nearly 25 percent decline in revenue for this fiscal year (which ends in September). Analysts also don't buy Russo's profitability claim. They are predicting continued losses for Lucent until the quarter that ends in September ... 2004.

Lucent is certainly in much better shape now than it was two years ago. The company has laid off more than half its work force to counteract the precipitous plunge in demand for telecom equipment.

The balance sheet is much cleaner as well. As of December, Lucent had about $3.4 billion in debt (with just $193 million due in the next 12 months). And the company reported in its latest quarterly filing that it has bought back another $729 million in debt since the beginning of this year ... although it has had to issue new shares to do so, which dilutes shareholder value.

Still, this is a major improvement over a few years ago. At the end of 2000, Lucent's debt load was $8.1 billion, and $5 billion of that was short-term.

But several analysts think the appetite for new telecom equipment remains soft, and that makes it tough to justify buying the stock now. "I don't see any big rush to get into Lucent," said Greg Teets, an analyst with A.G. Edwards. He does not own shares of Lucent and his firm has no investment banking relationship with the company.

Teets says it is encouraging to see that Lucent has announced some new contracts as of late, particularly in its wireless equipment business. But he says excess capacity still lingers in traditional phone service, a k a wireline, that will need to be worked out before big telecom carriers like Verizon, SBC Communications, and BellSouth start increasing their capital spending budgets significantly.

So, barring a sustainable improvement in demand, the easy money might already have been made in Lucent's stock.

"What Lucent has done in the last two or three years is shrink its way to a survivable size," said Jeff Kagan, an independent telecom analyst based in Atlanta. "Lucent has learned how to live on a restricted calorie diet, but you can't cut your way to greatness."

And about that stock price: Investors approved a reverse stock split at the shareholder meeting Wednesday. The terms of the split were not specified but it is expected to be a 1-10 split. This means that Lucent shareholders would receive 1 new share for each 10 they own. This would increase the stock price by a factor of 10 -- so don't be surprised to see Lucent soon trading above $15, a level it hasn't surpassed in more than two years.

But a reverse split would have no effect on the overall value of Lucent. Investors would simply own fewer shares at a higher price. For this reason, reverse stock splits are tactics often used by struggling companies desperately trying to avoid getting delisted.

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Reverse splits don't send an upbeat message. "If Lucent's management was extremely confident of where the company is headed, it might not need the reverse split," said David Ikenberry, a professor of finance at the University of Illinois at Urbana-Champaign who has studied stock splits. "Reverse splits are an artificial means to get a stock back into a trading range."

Lucent rival Ericsson (ERICY: down $0.15 to $7.25, Research, Estimates) performed a 1-for-10 reverse stock split in October and shares have increased more than 20 percent since then. Nortel Networks (NT: down $0.01 to $2.35, Research, Estimates) is considering one as well. But historically, companies that perform reverse stock splits tend to underperform the market. For example, Lucent's former parent, AT&T (T: up $0.13 to $18.70, Research, Estimates), has fallen nearly 35 percent since its reverse split in November.