Lucent reports a profit for 2nd straight quarter

TRENTON, N.J. -- Telecommunications gear maker Lucent Technologies reported a profit of $338 million for its first quarter as it held down costs, boosted revenues and nearly doubled its profit margin.

The company, based in Murray Hill, N.J., on Wednesday reported its second straight profitable quarter after 13 losing quarters during the worst of the telecom industry slump.

The profit for the October-December quarter equaled 7 cents per share. Excluding one-time items, net income was $156 million, or 3 cents per share. That was 4 cents a share better than the penny a share loss forecast by analysts surveyed by Thomson First Call.

Lucent posted a net loss of $264 million, or 11 cents per share, for the first quarter a year ago.

Revenues totaled $2.26 billion, up 9 percent from $2.08 billion in its fiscal 2003 first quarter.

Despite the improved report, Lucent shares sank 33 cents, or 7 percent, to close at $4.42 on the New York Stock Exchange.

"There was just an expectation that the revenues would be a blowout, and they came in pretty much as expected," said telecommunications analyst Susan Kalla of Friedman, Billings, Ramsey.

Telecom equipment analyst Steve Levy of Lehman Brothers offered other explanations for the stock's decline: profit-taking that reduced share prices throughout the telecom sector Wednesday and, for Lucent, a price correction after the stock rose from about $2.80 on Dec. 31 to as high as $5.

It was Lucent's second profitable quarter in a row. In the July- September period of 2003, its first in the black since 2000, Lucent earned $99 million, or 2 cents per share.

The one-time items in the latest quarter included a $140 million federal tax refund, a $64 million investment gain and a $54 million non-cash charge related to last year's settlement of 54 class-action shareholder lawsuits. The settlement, which will give plaintiffs 200 million warrants to purchase Lucent stock at $2.75 per share, may not get final approval for a year, and the cost of it has been rising with Lucent's share price.

"We've begun our fiscal 2004 with some good momentum," Lucent chief executive Patricia Russo told analysts during a conference call. "We are clearly seeing evidence that the market is stabilizing," although many companies have been tentative about making purchases, she said.

She noted that higher revenues were driven by a 32 percent increase to $960 million in sales for Lucent's wireless technology business. About $150 million of that came from resolution of Reliance Infocomm of Asia's months-long delay in accepting and paying for network equipment.

Revenues for Lucent's network equipment business fell 7 percent to $790 million, while revenues for services dipped 4 percent to $466 million. However, operating income from all three business segments was up over the year-ago quarter.

Russo said the company has been going after more work from the U.S. government, focusing on the $42 billion annual market providing recurring services for telephone companies and other service providers, and winning more projects outside the United States.

Revenues from the latter category have been rising and accounted for 40 percent of its fourth-quarter sales. Last week, for example, Lucent signed contracts totaling $350 million for network equipment in China.

"From high-speed mobile data to voice-over-IP to services, we're taking advantage of our strengths" to win more business, Russo said.

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