Associated Press - October 20, 2004
Lucent Posts 1st Profitable Year Since 2000


Telecommunications equipment maker Lucent Technologies Inc., whose multibillion dollar losses forced it to shed 80 percent of its work force, has recorded its first profitable year since 2000.

Lucent also reported a larger profit for its fourth fiscal quarter and predicted revenue growth for the coming fiscal year will be similar to the 7 percent gain over the past year.

Chairman and CEO Patricia Russo said, "We expect our market - and our business - to grow again in 2005 as our customers continue to invest in revenue-generating services and more efficient network operations."

The Murray Hill-based company had net income of $348 million, or 7 cents a share, for the three months ended Sept. 30, compared with earnings of $77 million, or 2 cents a share, after payment of preferred dividends a year ago.

The impact of several one-time items, including financing recoveries and charges related to the acquisition of Internet phone service equipment provider Telica, added a total of 3 cents a share to the results. Excluding those items, Lucent's results matched the 4 cents a share anticipated by analysts surveyed by Thomson First Call.

Revenue for the July-September quarter was $2.4 billion, up 19 percent from the $2.03 billion recorded in the year-ago period.

In afternoon trading on the New York Stock Exchange, Lucent was up 8 cents at $3.46 a share.

The results, announced Wednesday, marked Lucent's fifth consecutive profitable quarter - following 13 quarters of losses - and completed the company's fiscal year.

For the year, Lucent had net income of $1.15 billion, or 25 cents a share, after payment of preferred dividends, compared to a net loss of $1.16 billion, or 29 cents a share, after such required payments in 2003.

The company had annual revenues of $9.05 billion, up 7 percent from 2003 revenues of $8.47 billion.

The company expects 2005 annual revenues "to increase on a percentage basis in the mid-single digits, which we believe will be at or above the market growth rate," Lucent chief financial officer Frank D'Amelio said.

Russo said that wireless products will remain a strong growth area as service providers continue moving to new networks for mobile high-speed data services.

"On the wireline side, we will continue to see a transition to broadband access and new IP-based infrastructures and applications," Russo said.

The executives fielded several questions on retiree benefits during a conference call with industry analysts, including queries on the assumptions Lucent makes in estimating how much interest its pension funds generate.

Higher rates of return allow the company to record more money as income, a concern that has also been raised by the Lucent Retirees Organization.

D'Amelio said the company has been lowering the rates "to reflect what's going on in the capital markets," and will be reducing them again for fiscal 2005. "I don't view our rates as being anything other than conservative," he said.

The retiree group sent a letter Tuesday to the Securities and Exchange Commission requesting it investigate Lucent's pension plan. The group said issues include a potential conflict of interest because the company uses the same auditing firm for its corporate books and pension trusts.

The group claims to represent 235,000 Lucent retirees and dependents; the company puts the number at 225,000.

"With respect to our pension accounts, we strictly adhere to all legal and accounting requirements," Russo responded in a phone interview.

She also addressed analyst concerns that the pension credit recorded this year, $254 million, represented 73 percent of the company's annual profit.

Russo said that percentage has been shrinking as the company has become more profitable.

The company now has about 31,800 workers worldwide, down from a peak of about 150,000 in 2000.