Lucent Q3 profit falls, in line with warning

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Lucent Q3 profit falls, in line with warning
NEW YORK (Reuters) - Lucent Technologies said on Wednesday its quarterly profit fell 79 percent, in line with its warning earlier this month, due to lower sales of wireless network equipment in North America.

Lucent, due to be acquired by French communications equipment maker Alcatel later this year, said net income dropped to US$79 million, or 2 cents per diluted share, in its fiscal third quarter ended June 30.

That compared with US$372 million, or seven cents a share, in the year-ago quarter, when results were boosted by tax items and bad debt recovery that totaled US$127 million, or about two cents a share.

Analysts said consolidation in the telecommunications industry was partly to blame for the lower profit, a factor that had led Alcatel's decision to buy New Jersey-based Lucent for about US$14 billion.

The deal, which will create one of the biggest telecommunications equipment makers in the world, has won clearance from US competition authorities and the European Union. Lucent shareholders will vote on the deal on Sept. 7.

"Alcatel and Lucent coming together will give them an improvement of scale, and wallet share in terms of spending by carriers," said Prudential analyst Inder Singh. He maintained a US$4 price target on Lucent shares, which fell two cents to US$2.06 Wednesday on the New York Stock Exchange.

Quarterly revenue fell about 12 percent to US$2.05 billion, in line with its July 10 warning.

The company, a leading supplier of equipment for CDMA wireless networks, said the decline reflected a temporary slowdown in spending by customers who were about to shift to next-generation, high-speed products.


The weaker quarterly results are not expected to affect the merger. Alcatel chairman and chief executive Serge Tchuruk told a French newspaper after Lucent's warning that the deal still made sense.

"While these results were clearly disappointing, we do not believe these results are indicative of the longer-term opportunities we see in the global mobility market," said Lucent chairman and chief executive Patricia Russo.

Russo forecast that sales would pick up as Lucent's telecommunications carrier customers adopt new applications. She said consolidation among carriers could yield benefits in the long run.

"It can also create opportunities because they're integrating their networks and doing things that require help, and the kind of help we can provide," she told Reuters.

After their merger, Alcatel and Lucent are expected to be the market leader in the wireline network equipment market, with strength in broadband Internet access gear and in long-distance and high-speed optical networks. Russo reiterated the merger would create US$1.7 billion in synergies.

CFO John Kritzmacher said Lucent would achieve its highest quarterly revenue for the fiscal year in the fourth quarter "by a significant margin" as long as the roll-out of new products remains on track. He gave no specific figure.

Prudential's Singh said he expected revenue of around US$2.4 billion in the fourth quarter.

Gross margin for the third quarter was 41 percent, Lucent said, compared with 43 percent in the second quarter and 45 percent in the year-ago quarter.

In a separate announcement, Alcatel and Lucent Wednesday named several executives to key positions under the combined company. Alcatel chief technology officer Olivier Baujard will serve in the same role for the combined company.
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