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SAN FRANCISCO -- Lucent's (LU) - Get Lufax Holding Ltd American Depositary Shares two of which representing one Report ailments may have stunned Wall Street, but few expect a sectorwide contagion.

"This is not a market issue," CEO Richard McGinn told analysts in a somber, candid conference call with analysts late Thursday, during which he used the word "disappointment" repeatedly. "This is us not executing against a plan."

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Skeptical pros have criticized Lucent for using accounting

maneuvers to look like a fast-growing company. For at least two quarters last year, the company posted negative cash flow, thanks to soaring receivables and inventories. A strong performance in the

September quarter temporarily allayed concerns about its organic growth. But Thursday's announcement rekindled concerns that Lucent needs to adjust to telephone carriers' demands for new network technologies.

"It took a few quarters to show, but I think they have run out of places to hide," says Truc Do, an equity analyst with

SoundView Technology Group

, who has rated the stock a hold for about a year and whose firm has no banking ties to Lucent. "They have to come clean with their guidance. Their business is shifting, and they need to react to it."

Analysts were caught off guard by the news, and no one more so than Steve Levy, an equity analyst with

Lehman Brothers

. Levy raised his price target for Lucent to 95 from 90 early Thursday. Levy, whose firm hasn't performed underwriting for Lucent, rates the stock a buy.

Investors were also sideswiped by the news. J. Michael Gallipo bought Lucent shares for his

Monument Telecommunications

fund shortly before the company warned late Thursday. While stunned at the news, he does not anticipate a broader problem for the sector. "I certainly have heard nothing from the carriers that they are going to bring down spending," Gallipo says.

From what Lucent told investors Thursday, the company's problems are largely its own creation. Phone carriers have shifted their spending toward new technologies, and Lucent concedes that it couldn't manufacture the right new products fast enough. "We gave our customers who had a need to meet capacity requirements a reason to go elsewhere."

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As a result, "traditional customers have been shifting away from Lucent," says Do. "


(T) - Get AT&T Inc. Report

stopped buying tandem switches from Lucent and started buying switches from



," he says. Nortel has become a leader in new optical offerings as well, Do says.

Nortel hasn't changed its guidance for the quarter ended in December. A

First Call/Thomson Financial

survey of analyst estimates predicts Nortel will earn 42 cents per share. But the stock was also down 14% at 77 in extended trading Thursday, having closed market trading at 85. Late Thursday, both Cisco and Nortel said they were comfortable with current estimates for the quarter.

What does Lucent have to do to win back investor confidence? For starters, says Do, it must reignite revenue with new wireless and optical-network offerings. Companies such as


(CSCO) - Get Cisco Systems Inc. Report



(CIEN) - Get Ciena Corporation Report

now sell advanced optical products.

"It really starts to do away with the need to buy more" of Lucent's conventional fiber-optic systems, says

Andy Kessler

, partner with

Velocity Capital

and contributor to


. Currently his fund is not invested in Lucent, Cisco or Ciena.

Until then, it could be rough going. "I have a fear that

Lucent is going to be swimming upstream," says Kessler.