SEC Deal Lightens Lucent's Load

Some of the dark clouds over Lucent (LU Quote - Cramer on LU - Stock Picks) have dissipated, so now investors are thinking about sunny times ahead.

The rehabilitating New Jersey equipment house took a big step toward health Thursday, saying it is close to reconciling past accounting misdeeds with the Securities and Exchange Commission. The development came just days after Lucent got some rare good news on the credit front, with a big rating agency removing the company's debt rating from its watch list.

"Lucent has demonstrated, to a fair degree, that they have a grasp on near-term revenues and have a cost structure in place that should allow them to achieve their profit goals," says Standard & Poor's analyst Bruce Hyman.

Now the only hurdles the company must clear are a still-shaky market for the telecommunications gear it sells, a battle to reduce its heavy debt load and the odd lawsuit or two. Lucent investors, appreciating their reduced burden, sprung for a 9-cent rise in the stock, to $1.60.

Wrist Slapping

Lucent, which helped kick off the era of tech accounting scandals with its January shocker three years ago, says it has tentatively agreed to settle the SEC's investigation into $679 million worth of credits, discounts and fictitious sales improperly booked in 2000. Having brought the transactions to the SEC's attention and restating its financial reports for that period, Lucent expects it won't be required to pay fines or admit to any wrongdoing.

An SEC settlement would finally remove an albatross from Lucent's neck. Better still, the prospect of a settlement marks the second indication in less than a week that things have stopped getting worse for the beleaguered company.

On Tuesday, credit reviewer Standard & Poor's took Lucent off its watch list, ending the immediate prospect of a downgrade for the company. While lifting the ratings pressure a bit on Lucent, S&P maintained its negative outlook and B-minus rating on the company. S&P makes rival Nortel (NT Quote - Cramer on NT - Stock Picks) a B credit with a negative outlook.

But more important, the move signals that Lucent has begun to convince some on Wall Street that it may have finally stopped its financial free fall.

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