Lucent expects weak quarter; S&P lowers rating

Citing weak carrier spending, particularly in North America, Lucent Technologies said today that its revenues for the fiscal fourth quarter will be 20% to 25% lower than the $2.95 billion in revenues it posted in the fiscal third quarter.

For the period ending Sept. 30, the company said it expects to post a pro forma loss per share of approximately 45 cents, resulting primarily from this decline in revenue, the inability to recognize tax benefits on losses, and charges resulting from a “significant” customer financing default. A spokesman for Lucent declined to identify the customer.

The company had not provided any guidance prior to today’s announcement. However, the consensus analyst EPS estimate taken from First Call was a 16-cent loss.

No particular business unit within Lucent is bearing the brunt of the decrease in spending, the spokesman said. “The tightening in spending is across the board.”

Lucent also said it is working on a plan to reduce the revenue required for quarterly break-even EPS to between $2.5 billion and $3 billion. Such a move will entail additional layoffs at the company, as announced in its second quarter earnings. These and other cost-cutting measures will be detailed during the third quarter earnings call.

In response to Lucent’s announcement, Standard & Poor’s Ratings Services lowered the vendor’s credit rating one notch from “B+” to “B”, the fifth-highest junk rating. S&P is maintaining a negative outlook for Lucent.

According to a research note from S&P, the negative outlook reflects the possibility that Lucent may not meet its goal of returning to net profitability by the fourth fiscal quarter of 2003.

“The company’s core customer base continues to defer purchases of new communications equipment,” the note said.