Skip to main content
Publish date:

Lucent Dons Rally Cap

Shares surge 6% after a solid quarter, but order delays loom.

Lucent

(LU)

basked in the glow of a sunny quarter Tuesday, but it's not difficult to spot the customary clouds looming on the horizon.

Lucent jumped 6% in morning action as investors applauded a rare

earnings beat. The rally helped Lucent holders recoup some of the losses they have sustained since their shares went into a tailspin this past spring.

But as the Murray Hill, N.J., gearmaker's $11.2 billion buyout by

Alcatel

(ALA)

lingers on, customers are putting purchase decisions on hold.

After reporting fiscal fourth-quarter results, executives on Lucent's earnings conference call with analysts said that the longer the merger process draws on, the more they have seen "some uncertainty in buyers' decisions."

Lucent and Alcatel agreed to combine in April and said Tuesday that they still expect to have the deal closed by year-end. But increasingly, telcos, shopping for network upgrade paths, are choosing to wait until it is clear which products will survive after the union, says Lucent chief Pat Russo.

TheStreet Recommends

"If they can delay that decision, they will delay that decision," Russo said on the conference call. This is evident in areas where Lucent and Alcatel have similar gear and presumably only one product will make the cut.

"Customers want to know, what exactly is your road map and what is your time frame?" Russo explained.

Russo said this wasn't necessarily the case in areas such as wireless infrastructure, where Lucent has a significant business.

But even that picture has become less clear in recent weeks after Alcatel

agreed to buy a segment of

Nortel's

(NT)

wireless gearmaking business.

But Russo, who will take the top job at the soon-to-be Paris-based Alcatel Lucent, touted the merged strength of the two phone-equipment giants.

"The combined company will have leading positions in every relevant area of the network evolution under way," Russo told analysts on the earnings call.

Lucent shares rose 14 cents to $2.48, and Alcatel was up 75 cents to $12.78 in midmorning trading Tuesday.