Lucent's Growth Grope

Lucent (LU) shared its state-of-the-business address with analysts Friday, promising a better second half of the year.

But Wall Street didn't seem to see all that much sunshine at the end of the tunnel.

The Murray Hill, N.J., telecom equipment giant hosted its 2006 analyst day in New York, where Lucent executives outlined their new "game changer" product platform called Internet protocol multimedia subsystem, or IMS. The brass also spent a big chunk of time defending a forecast for 5% growth in fiscal 2006, which ends in September.

During the half-day event, Lucent reiterated the guidance it gave last month. And analysts, picking up where they left off then, repeated their questions about how the company can predict any growth when its biggest business -- wireless -- is decelerating and its wireline sales are flat.

The answer, says CFO Frank D'Amelio, lies about six months out, when demand usually starts to pick up. For the past two years, D'Amelio explained, Lucent has seen stronger sales performance in the third and fourth quarters ending in June and September. He says there's no reason to think the company won't follow that pattern for a third time.

To back up his optimism, D'Amelio said, though there's no "major numbers" expected, presumably meaning large wireless equipment orders, the company is "still selling lots of products in mobility."

D'Amelio offered three areas of the company where he expects sales growth. The first is 3G wireless technology called universal mobile telecommunications systems, or UMTS. The other two are network integration services and next-generation optical gear.

The problem Lucent investors face is that the strong parts of the business will have a hard time balancing the decline in the company's old-line switches and a slowdown in orders from big wireless spenders like Verizon (VZ) and Sprint (S).