Facing Investor Questions, Lucent Offers Few Answers

Lucent (LU) investors looking for clear guidance on the company's prospects Monday got a lot of smoke.

The company is putting off until January a discussion of its earnings and revenue projections for the rest of fiscal 2001, which started this month. Also unanswered is how much of a restructuring charge the company will take at year-end. This presumably large figure will help reset the financials for the company. Lucent also conceded Monday that it has lost two big customers, but wouldn't say how long that loss will hold earnings down.

Come back in January to learn more. After hours, Lucent shares rose $1.06 to $23.12.

The New Lucent

"We will come back to you in January with guidance for the new Lucent for the remainder of the fiscal year," said CFO Debra Hopkins on a conference call with analysts Monday evening. "However, we do expect sequential improvement in each quarter of 2001."

But Hopkins declined to explain why there would be any improvement. And what was said wasn't very encouraging.

The company will continue to lag Nortel(NT) in its new product line -- the OC192 optical transport product. Lucent had expected to sell $750 million worth of OC192, or 10-gigabit, equipment in the fourth quarter, but failed to reach that mark and said it's unlikely to improve that performance during the current fiscal 2001 first quarter.

On brain drain, Lucent is currently losing 20% of its talent -- one in five employees -- annually. Cisco (CSCO), by comparison, says its talent drain is in the single digits.

Cross 'Em Up

Another troubling issue was vendor financing, which TheStreet.com explored earlier Monday. The company increased its outstanding loans to customers by $300 million in the latest quarter and said it was going to pursue this sort of financing more aggressively, like a commercial lender.

Instead of looking at vendor financing as a risk, Hopkins says it will figure strongly in Lucent's new banking future.

"I think it's how we'll keep the velocity of that portfolio moving and how we must run it like a bank and really think about it from that perspective," the executive said.

And trying to catch up to the competition has exacted a toll. Gross margins dropped 39.2% in the fiscal fourth quarter as a result of falling sales and price pressure in optical, switching and wireless equipment. This isn't expected to improve, and the company expects to see margins decline by an additional full percentage point during the first quarter.

But then, as Lucent says, we'll know more in January.

>To order reprints of this article, click here: Reprints