Wireless Wins Power Lucent Profit

Updated from 7:33 a.m.

Lucent ( LU) rose Wednesday morning after posting its fourth straight profitable quarter.

For its third quarter ended June 30, the Murray Hill, N.J., maker of telecom gear posted a profit of $387 million, or 8 cents a share. That reverses the year-ago loss of $254 million, or 7 cents a share. Sales rose 11% from a year ago to $2.19 billion.

Analysts surveyed by Thomson First Call had forecast a 2-cent profit on sales of $2.2 billion. The latest quarter included a 4-cent gain on the revaluation of warrants to be issued as part of Lucent's global settlement of shareowner litigation, bad debt and financing recoveries, along with a net reversal of certain restructuring charges.

The company's gross margin was flat at 43%.

"We have consistently generated profitable results as the market has stabilized and expect to report a full year of profitability when we talk to you again in October," financial chief Frank D'Amelio said. "At this point, we expect annual revenues to increase on a percentage basis in the mid-single digits for the 2004 fiscal year. We will continue to manage our cost and expense profile as we go forward, while making selective investments in areas like VoIP and mobile high-speed data to profitably grow the business."

Wall Street analysts expect the company to earn a dime a share for 2004 on sales of $8.9 billion.

The news comes as Lucent has started up a winning streak in the red-hot wireless business just at the right time. Last week the company finally nailed down a widely expected upgrade deal with the leading U.S. cell phone service provider, Verizon Wireless.

The deal marked a major victory for Lucent, whose core business of selling conventional phone gear continues to stagnate. The company this week signed a core optical networking agreement with New York's Verizon ( VZ), but other advances on that front have been few and far between.

The company has strung a series of quarterly profits together after a long run of steep losses dating back to the tech boom. Lucent expanded pell mell during the Internet bubble and, like many of its peers, found that it was far too bloated to make money once the party ended. The company then spent months and years jettisoning businesses and workers with the aim of getting into fighting trim.

Meanwhile, the company continues to struggle with other distractions. In May, the Securities and Exchange Commission sued nine former and current sales employees in a year 2000 revenue-overstatement scheme. Meanwhile, Lucent remains under investigation for its actions in a Saudi Arabian bribery suit. Earlier in 2004, the company settled a $420 million shareholder lawsuit, which charged that the company was using trickery to enhance its growth and prop up its stock price.

Wednesday morning, Lucent shares added 8 cents to $3.48.

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