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Lucent Backs Off Growth Plan

The company concedes that revenue won't grow this year.
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Lucent (LU) posted a sharper-than-expected revenue decline for its fiscal second quarter as its North American wireless business weakened, and the company said full-year revenue will fall from year-ago levels.

The Murray Hill, N.J., telecom-equipment company made $181 million, or 4 cents a share, for the quarter ended March 31, down from the year-ago $267 million, or 6 cents a share. Revenue fell 8% from a year ago to $2.14 billion. Analysts surveyed by Thomson Financial were looking for a 3-cent profit on sales of $2.24 billion.

"Turning to our second-quarter results, we reported a strong gross margin of 43% and operating margin of 12%," said CEO Pat Russo. "Our revenues increased modestly on a sequential basis, resulting from a measured pace of growth in some of the markets in which we participate, particularly in North America, where we have seen slower-than-anticipated wireless deployments."

The company said it expects North American wireless deployments to build through the rest of the year. But Lucent cautioned that it expects to see revenue hit to the tune of $500 million in India and China. As a result, while the company expects to see second-half revenue improve from first-half levels, it now believes Lucent will post a sales decline for fiscal 2006 ending in September. Lucent had previously

set a 5% revenue growth target for the year, despite the snickers of some observers.

The company also said it will stop offering financial clues to Wall Street as it prepares to merge with France's




"Given the pending merger with Alcatel, we are discontinuing our practice of providing specific annual guidance," said finance chief John Kritzmacher. "We will continue to focus on improving our operational performance as we prepare for successful integration with our merger partner."