Lucent’s Russo: Alcatel merger ‘on track’

Lucent Technologies chairman and CEO Pat Russo said during the company’s earnings call this morning for its fiscal fourth quarter and fiscal year 2006 results that Lucent’s pending merger with French vendor giant Alcatel remains “on track” to close by the end of 2006. The reaffirmation comes amid a lengthy review of the deal by the U.S. Committee on Foreign Investment, and Russo admitted that the long wait has affected customer buying decisions in product areas where Lucent and Alcatel overlap.

“Customers are pausing and seeking clarity from us about when this merger will close,” Russo said on the call. “This is a short-lived condition.” Shareholders of both Lucent and Alcatel approved the merger more than a month ago, and the companies have since filed an application with the CFI, whose review process is scheduled to take up to 90 days.

“We continue to make excellent progress on our integration planning to ensure a smooth transition from Day 1,” said Russo.

The wait for the merger’s completion did not appear to drastically affect Lucent’s fiscal fourth quarter earnings. The company reported $2.56 billion in revenue for the quarter, which was up 5% from the same quarter last year, and up 25% from the third quarter of 2006. Russo noted that the fourth quarter was Lucent’s best earnings period of 2006.

Quarterly net income was $371 million or 7 cents per diluted share, roughly flat with the same quarter a year ago, but much improved from the net income of $79 million reported in the third quarter this year.

The results for the complete 2006 fiscal year were not as rosy, with $8.8 billion in revenue, a decline of 7% from the previous year. Net income for fiscal 2006 was reported at $527 million, well under the 2005 figure of $1.19 billion.

“Our performance for the full year 2006 fell short,” Russo said, adding that while anticipated industry trends such as increasing IP multimedia subsystem deployment and EV-DO Rev. A introduction played out, some revenue-generating trends didn’t play out as quickly as Lucent had hoped when 2006 opened.

“In addition to the rollout of our EV-DO Rev A and HSDPA solutions during the quarter, we also continued to convert IMS trials into contracts, announcing that KPN, The Netherlands’ largest service provider, had selected Lucent’s IP multimedia subsystem solution to replace its legacy public switched-network,” Russo said. “Lucent Worldwide Services was also chosen as the prime integrator for the migration to KPN’s All-IP network. During the fiscal year, we added six customers for our IMS portfolio, announced more than 70 contracts in 25 countries, and saw revenue growth in UMTS, professional services, data, optical and applications.”