MURRAY HILL, N.J.-Thanks in part to a $278 million bankruptcy lawsuit ruling, Lucent Technologies Inc. posted a first quarter net loss of $104 million, or 2 cents per share.
The telecom equipment maker said the ruling, worth 6 cents per share, was ordered by a federal bankruptcy court in a case involving bankrupt broadband provider Winstar Communications Inc. Lucent has filed an appeal to the court’s ruling.
Interestingly, excluding the $287 million ruling and other one-time charges, the company exceeded analyst expectations, posting a profit of 4 cents per share. UBS Investment Research estimated Lucent would post only a 1-cent-per-share profit.
Lucent posted a net income of $174 million, or 4 cents per share, in the same quarter a year ago. Revenue for the company’s first quarter slipped to $2.05 billion, down 12 percent from $2.34 billion a year ago.
Wall Street didn’t seem surprised by the earnings shortfall as Lucent’s stock was trading just one cent below its opening price of $2.51 after the news.
“This quarter, despite the decline in revenue, we maintained a solid gross margin performance due to our continued focus on simplifying our operations and diligently managing our cost structure,” said Patricia Russo, chairman and chief executive officer at Lucent. “Based on the review of our expectations for fiscal 2006 and ongoing interactions with our customers, we are confident that our revenue performance will be much stronger for the remainder of the year.”
In early January, Lucent warned investors that its revenue forecast for the quarter would fall short due to a slowdown in spending by Verizon Communications Inc. and Sprint Nextel Corp., as well as sputtering sales in China.
“We have continued to strengthen our position in next-generation networks this quarter by winning three more IMS contracts, and we are conducting an extensive lab trial with Verizon on a wide range of elements from our IMS solution,” said Russo. “We continue to pursue those market opportunities that align with our strengths and investments in IMS, 3G mobile networks, services, next-generation optical and access, and applications.”
Lucent said its IMS products made strong wins during the first quarter, noting deals with Cingular Wireless L.L.C., AT&T Inc. and BellSouth Corp.
UBS said Lucent’s results for the remainder of the year depend primarily on gaining share with Cingular, as well as from third-generation network construction in China.
“As we previously stated, we now expect Lucent’s annual revenues for fiscal 2006 to be essentially flat or increase on a percentage basis in the low-single digits for the year,” said Frank D’Amelio, chief operating officer and chief financial officer at Lucent. “As always, we will continue to look for ways to profitably grow the business and expand our customer base, while improving our productivity.”
Lucent’s first quarter operating expenses were $940 million, or $662 million excluding the Winstar judgment. Last year’s first quarter saw operating expenses of $665 million.
The company’s gross margin for the quarter was 42 percent of revenues as compared with 46 percent in the fourth quarter of 2005 and 42 percent in the year-ago quarter.
“Lucent has been through a rough few years, and just as we think they are coming out of it, we now have to deal with these disappointing numbers,” commented Jeff Kagan, telecom industry analyst. “The question is, will Lucent be able to turn this around, or is this decline something they, and investors, have to deal with from now on.”
