Lucent Profit Quadruples on Strong Sales

Lucent Technologies Inc. (LU) Tuesday said quarterly earnings rose four-fold on strong sales of wireless network products and services, sending its shares up nearly 6 percent.

Lucent also said it would combine its business to wireless service providers and traditional phone companies into one unit, simplifying operations and reducing costs.

Its customers are increasingly overlapping on high speed networks that deliver advanced services such as video and data. Lucent said it will keep its services business separate.

The Murray Hill, N.J., company said it earned $282 million, or 6 cents a share in the fiscal second quarter ended March 31, compared with $68 million, or 2 cents a share, in the year-ago quarter. The second-quarter results included 2 cents a share of benefit related to income tax matters, Lucent said in its statement.

The profit matched the average analysts' estimate, helping to restore some tech investor confidence, after the market took a hit from a shortfall reported last week by technology bellwether IBM (IBM). Lucent was the most active issue in early trading.

Unlike IBM, which saw weakness in corporate spending, Lucent gleans the majority of its overall revenue from phone and wireless companies.

"I think investors are going to view this as fairly positive," said American Technology Research analyst Albert Lin. "Revenue was as expected; I think margins were stable. You could point to those types of metrics as being positive."

Lucent posted revenues of $2.34 billion in the quarter, flat from its fiscal first quarter and up 6 percent from the year-ago quarter. Wall Street had expected $2.31 billion on average. Gross margin was 42 percent, even with the first quarter and easing from 43 percent in the year-ago period.

Lucent's strong wireless business compensated for sluggish demand for network gear used by traditional phone companies, rising 24 percent to $1.20 billion, its highest level since fiscal 2004. Growth was fueled in part by big carriers such as Sprint (FON) and Verizon Communications (VZ) as they build out so-called 3G high-speed networks, analysts said.

"It's really a continuation of the pattern we've seen where the wireless side of the business does well and the wireline struggles," said Janco Partners analyst Eric Buck, who rates Lucent "market perform."

Lucent's stock rose 14 cents, or 5.9 percent, to $2.50 on the New York Stock Exchange after earlier touching $2.57.

In the company's earnings statement, Lucent Technologies Chief Financial Officer Frank D'Amelio confirmed Lucent's forecast for the fiscal year: "We continue to expect Lucent's annual revenues for fiscal 2005 to increase on a percentage basis in the mid-single digits."

On a conference call with analysts, Lucent executives said it was premature to quantify the amount of savings the company was expecting from combining the wireless and so-called wireline businesses.

"This will simplify, speed time to decisions," Lucent Chief Executive Patricia Russo told investors, characterizing the company's quarterly results as "solid," "despite pricing pressure in the market."

Sales of network products to traditional phone companies, which has been steadily declining, fell 18 percent from a year-ago to $589 million. Russo said that that market is stabilizing, helped by bright spots such as the shifting of voice calls over the Internet, known as VoIP.

Revenue from services increased 4 percent from a year ago, to $499 million.