Slowing demand hits Lucent revenues

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Lucent Technologies, the US’ largest telecoms equipment maker, blamed slowing demand in China and the US for a sharp decline in first-quarter revenues and cut its full-year revenue forecast.

Lucent said it now expected revenues for the year ending in September 2006 to be “essentially flat or [to] increase in the low-single digits”. It had previously forecast mid single digit growth on a percentage basis.

The revised figures sent Lucent shares tumbling. The stock, which has fallen 22 per cent over the past year, ended Friday’s session 6 cents, or 2.2 per cent, lower, at $2.65.

Lucent said first-quarter revenues would be about $2.05bn, down about 12 per cent from last year’s $2.34bn and well below most analysts’ estimates.

Lucent cited “waning sales in the US and China” as a reason for the slowdown. China accounts for about 9 per cent of Lucent’s sales and the US about 63 per cent. Wireless equipment accounts for about 44 per cent of revenues.

The warning is viewed as reflecting a slowdown in equipment spending by specific customers – particularly Verizon Communications and Sprint Nextel, two of Lucent’s biggest customers in the US – rather than weakness in the overall market.

In China, China Unicom and China Telecom have both been holding back on capital spending pending a government decision on the award of 3G wireless licences.

Patricia Russo, chairman and chief executive, who has led Lucent back to profitability since taking over four years ago, said she was “clearly disappointed” but said this was “a temporary setback to [our] progress, and we are confident that our performance will be much stronger for the remainder of the year.”

She added: “Our customers continue investing in the next generation of networks that will be based on IMS, and despite this quarter’s results, we continue to see opportunities in the market that align with our strengths and investments in IMS, 3G mobile, services, next-gen optical and access.

“As always, we will continue to look at ways to profitably grow the top line, broaden our customer base and improve our cost structure.” Separately, the company named Frank D’Amelio, its chief financial officer, as its new chief operating officer.

“Frank brings to this position a breadth and depth of both financial and operational experience as well as a deep knowledge of the business,” Ms Russo said.

Mr D’Amelio joined Lucent from AT&T as president in 1998 and became CFO in May 2001. His appointment is seen as a sign that he is heir apparent to Ms Russo.

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