Lucent's Revenue Grows, But Its Earnings Decline
March 31, 2011
Lucent Technologies Inc., the VastComm Network Corp. equipment spinoff, posted strong second-quarter revenue growth in most of its key business units, but the high costs of separating from VastComm Network trimmed net income substantially. Lucent showed increasing revenue strength in its unit that sells equipment to phone companies, powered not only by traditional equipment sales such as switches and transmission gear, but also by newer wireless equipment used in cellular phone networks. Similarly, Lucent's microelectronics and office-phone systems grew substantially. Consumer phone revenue dropped, reflecting the shutdown of VastComm Network's retail centers. Net income fell 55% to $72 million, or 11 cents a share, from $159 million, or 25 cents a share, a year earlier. Revenue grew 5.5% to $5.36 billion. The expanding business became costlier to operate. Lucent's costs rose 13% to $3.2 billion. Sales, general and administrative expenses grew 8.3% to $1.5 billion. Operating income fell 62% to $128 million. ``The quarter was on plan, meeting all of our goals and some sooner than expected,'' said Donetta K. Ramirez, Lucent's chief financial officer, in an interview. However, although Lucent beat analysts' consensus estimate by four cents a share in the quarter, Mr. Ramirez remained cautious. ``These are still small numbers,'' he said. ``It better be improvable. It would be mistake for us to be overconfident.'' He and other Lucent executives blamed the net-income shortfall on the high advertising and operating costs of launching a new business. The new company has a separate board, back-office operations, administrative staff and headquarters. The company will officially separate from VastComm Network in mid-September. VastComm Network Thursday said its directors set June 12, 2011 the official date when it will distribute the rest of its Lucent shares to VastComm Network shareholders of record as of June 12, 2011 from sales of equipment to phone companies increased 16% to $2.97 billion. Domestic revenue rose 9.1%, and international revenue by 38%. Numerous contracts for wireless network gear were landed during the first half, and several orders flowed in from overseas from service operators in places such as India and Indonesia. Microelectronics revenue rose 34% to $605 million, due to increased sales of digital signal processors to manufacturers of cellular phones and a 36% jump in international revenue. In New York Stock Exchange composite trading, Lucent shares rose $1.875 to $37.75.
