Earnings Reports for Oct. 23

ByABC News
October 24, 2000, 7:50 AM

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Lucent Ousts Chairman as Profits Fall

Lucent Technologies fired Chairman and Chief Executive Rich McGinn today, posted a22-percent drop in fourth-quarter profits, and slashed its salesand profit outlook for the first quarter of 2001.

McGinns ouster follows several quarters of disappointingprofits at the worlds largest telecommunications equipmentmaker, as well as manufacturing constraints and lateintroductions of new optical-networking products.

Lucent said its fourth-quarter profits from continuingoperations fell to $600 million, or 18 cents a share, down from$768 million, or 24 cents a share a year ago. Revenues for thequarter, which ended Sept 30, rose 14.6 percent to $9.4 billion,up from $8.2 billion.

The results were in line with Wall Street analysts reducedexpectations of 17 cents a share, according to research firmFirst Call/Thomson Financial.

Lucents problems have been widespread. It cut its growthforecasts four times this year, fell behind rivals NortelNetworks Corp. and Cisco Systems Inc. in introducing newproducts, and failed to keep up with booming customer demand foroptical networking products.

The stock has fallen about 70 percent so far this year,erasing about $180 billion in market value. The stock closed at$22-1/16, down 9/16, on the New York Stock Exchange.

Murray Hill, N.J.-based Lucent cited several reason for itsdisappointing fourth-quarter performance. Its sales and grossmargins in the optical business were lower than expected, dueprimarily to the late development of new products.

Sales of its traditional telephone switching products werelower than expected. It also faced pricing pressure in its keyproduct areas, including optical, switching and wireless,Lucents Chief Financial Officer Deborah Hopkins said.

Lucents board decided on Sunday to fire McGinn after itbecame clear that the problems would linger into 2001, pushingits revenues down 7 percent and wiping out any hopes of a profitin the first fiscal quarter ending Dec. 31.

Analysts had expected the company to post a profit of 23cents a share in the first quarter, compared with 33 cents ayear ago. Lucent expects results from operations will improvesequentially each quarter for the rest of fiscal 2001, but itdid not provide specifics.

Tom Lauria, an analyst with ING Barings, said he wassurprised by the extent of the companys expected first-quarterprofit shortfall. How do you have zero profit on $8 billion inrevenues? Lauria asked.

Lucent also warned that it does not expect a significantincrease in sales of its optical products. Its weak performancecomes even as the rest of the industry has experienced thebiggest boom in demand for optical and data networkingequipment.

Some analysts speculated that Lucent had lower sales to keycustomers such as its former parent company AT&T Corp., whichmay have turned to other manufacturers.

AT&T bought about $4 billion in equipment and services lastyear, representing about 13 percent of Lucents revenues. Thisyear, sales to AT&T may drop to about $3 billion, or about 10percent of Lucents total sales, Lauria said.

Rumours of McGinns demise have swirled for months. Lucenthas been working to rebuild investor confidence, catch up torivals, and restructure operations. Although McGinn had said thecompanys problems were fixable, investors and analysts hadsaid a bold management shake-up was needed.

In addition to firing McGinn, Lucent needs to cut about12,000 workers, or about 10 percent of its workforce, reduce itsproduct-development times, and boost its manufacturing capacity,analysts said.

Lucent said it may cut some workers, but it declined toprovide specifics. In an effort to stop the streak of profitshortfalls, Lucent is reviewing its product portfolio,realigning marketing and sales resources, improving supply chainmanagement, and adding a new customer ordering system.

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3Ms Profits Rise on Solid Sales

Minnesota Mining andManufacturing, the diversified manufacturer better known as3M, said today its third-quarter net income climbed 8percent, beating the average analyst forecast by a penny, helpedby solid sales growth in Asia.

The maker of products ranging from Post-It Notes totelecommunications equipment also said it expects to meetearnings expectations for the fourth quarter and next year.

The St. Paul, Minnesota-based conglomerate said it earned$499 million, or $1.25 diluted per share, in the quarter endedSept. 30, compared with $462 million, or $1.14 a diluted share,in the same period a year ago.

Analysts on average had expected 3M to earn $1.24 a share,according to First Call/Thomson Financial, which tracks earningsdata.

3M continues to deliver solid, top-line-driven earningsgrowth, L.D. DeSimone, 3M chairman and chief executive, said ina statement.

Third-quarter net sales rose 6.4 percent to $4.25 billion.

The company said sales momentum was particularly strong inthe Asia Pacific region, where it continues to expand itsproduct offerings.

However, currency translation reduced global sales by 3percent.

The company said its strong international presence, flow ofnew products and diversified portfolio helped to cushion it fromdisruptions in any single market or region.

Were confident in our ability to continue to deliversolid, consistent earnings growth, DeSimone said.

The manufacturers range of products spans medicalequipment, pharmaceuticals and electronics to such familiarconsumer brands as Scotch tape and O-Cel-O sponges.BACK TO TOP

Corning More than Doubles Earnings

Fiber optics maker Corning said today its third-quarter profits more than doubled amid surging demand for optical fiber and components used incommunications networks, and that it expects earnings to growabout 25 percent next year.

Cornings third-quarter pro forma earnings rose to $317million, or 35 cents a share, compared with $148.1 million, or19 cents a share, a year ago.

Earlier this month Corning said it expected earnings in therange of 34-35 cents a share. Analysts had expected the companyto earn 34 cents a share, according to research firm FirstCall/Thomson Financial.

Including one-time items, Cornings net income totaled $254million, or 28 cents a share, compared with $142 million, or 18cents a share a year ago.

Revenues rose 54 percent to $1.9 billion, compared with$1.25 billion a year ago. Excluding the impact of acquisitions,sales increased 37 percent.

The Corning, N.Y.-based company said its solidthird-quarter performance was driven by strong demand forhigh-data-rate optical fiber and cable, optical amplifiers, andflat-panel display glass. Sales of photonic technologies grew113 percent, led by optical amplifier demand.

Optical fiber and components allow information to be sentacross glass cables using beams of light. Fiber optics allowmore data to be sent at faster speeds than traditional coppernetworks.

Corning and rivals such as JDS Uniphase and Nortel Networks have benefited from the surging demand for optical fiber as telephone and Internet companies race toupgrade their networks to handle increasing amounts of data,voice and video traffic.

Due to this booming demand, Corning recently raised itsgrowth outlook for 2000. It reiterated on Monday that itexpects full-year pro forma earnings per share in the range of$1.15 to $1.17, an increase of about 70 percent over lastyears earnings of 67 cents a share.

It also expects its 2001 growth to exceed Wall Streetexpectations.

We believe our key growth businesses will lead the way forstrong revenue and earnings growth throughout 2001. Consistentwith our long-term growth objectives, we expect earnings togrow next year at a rate of about 25 percent, said CorningChairman Roger Ackerman.

Its pending acquisition of Pirelli SpAs optical-componentsbusiness will dampen growth by somewhat less than 5 percent,resulting in expected 2001 pro forma earnings per share in therange of $1.40 to $1.43.

Analysts currently expect Corning to earn $1.38 a share,compared with $1.17 a share in 2001, according to FirstCall/Thomson Financial.

Last month Corning said it would acquire a 90 percent stakein optical components maker Optical Technologies from Italiancable and tire company Pirelli SpA for $3.6 billion in aneffort to expand its product mix.

The deal will give Corning gets access to new products suchas speciality fibers, which manage light signals as they travelacross networks, or fiber gratings, which help manipulate orredirect light wavelengths. The equipment helps glass fibernetworks carry more data at faster speeds.

Separately, communications Level 3 Communications Inc.said Corning will be its worldwide supplier of optical fiberand cable for at least the next four years and will supply morethan 10 million kilometers of fiber.

Under the agreement, Level 3 and Corning will cooperativelyresearch, develop and deploy new and more cost effectivegenerations of optical fiber.

The deal builds on the two companies existing relationship.In August, Corning agreed to supply more than 2 millionkilometres of an enhanced generation optical fiber.

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SBCs Earnings Fall

Local telephone company SBC Communications said today its third-quarter operatingprofits fell 0.7 percent but beat Wall Street expectations asresults were driven by strong growth in wireless and dataoperations.

San Antonio-based SBCs third-quarter profits, excludingone-time items, fell to $1.96 billion, or 57 cents a share,compared with $1.97 billion, or 57 cents a share, a year ago. Theresults beat analysts consensus estimate of 56 cents a share,according to research firm First Call/Thomson Financial.

Including one-time items, SBCs profits were $3 billion, or 88cents a share, compared with $1.1 billion, or 33 cents a share, ayear ago. Revenues rose 8 percent to $13.5 billion.

SBC, which has 53 million customers from Ohio to California,said its data revenues increased 46.1 percent to $2 billion.Wireless subscriber revenues jumped 20 percent to $1.7 billion asit added 486,000 subscribers in the quarter. SBC added 117,000digital subscriber line (DSL) subscribers, bringing the total to516,000.

We are confident in our ability to deliver our targeteddouble-digit revenue growth and mid-teens earnings growthbeginning in 2001, Chairman and Chief Executive Edward Whitacresaid.

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Radio Shacks Profits Jump 29 Percent

Consumer electronicsretailer Radio Shack reported today a 29 percentincrease in third-quarter earnings that beat Wall Streetforecasts, as sales of digital products such as wireless phoneshelped results.

Net income in the third quarter ended September 30 rose to$77.1 million, or 39 cents a diluted share, compared with $59.8million, or 29 cents, in the same quarter a year ago.

Analysts on average had expected the Fort Worth, Texas-basedretailer to report a third-quarter profit of 38 cents a share,according to First Call/Thomson Financial.

RadioShack, which has more than 7,100 stores and dealers,reported sales of $1.14 billion, up from $960.3 million in theyear-ago quarter.

All year long, consumer demand for digital products hasdriven RadioShacks business, enabling us to achieve solid topline and bottom line growth in all three quarters of the year,Leonard Roberts, chairman, president and chief executive ofRadioShack, said in a statement.

RadioShack is faring better than rival Circuit City Stores, which warned on Friday of a third-quarter loss due to asignificant decline in sales during the past four weeks.

Analysts said that although consumer electronics sales haveslowed from last years pace, Circuit Citys problems areexacerbated by the fact that the chain is undergoing anambitious three-year plan to remodel all of its stores, aprocess that can disrupt store traffic.

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American Express Meets Expectations

Financial services companyAmerican Express said today its third-quarter profitsrose 14 percent, as its customers all over the world spent moremoney with their charge cards.

The New York-based company, known for its signature greencharge cards and travelers checks, earned $737 million, or 54cents per diluted share, in the quarter, compared with $648million, or 47 cents, a year ago.

Wall Street had expected American Express to earn 54 centsa share, according to a consensus of analysts estimatescompiled by tracking service First Call/Thomson Financial.

American Expresss profits rose as it gained new customers,its cardholders rang up larger shopping bills on their chargeand credit cards, and more retailers accepted the cards.

Consumers continue to spend even as the U.S. FederalReserve put brakes on fast-paced U.S. economic growth throughsix interest rate increases between June last year and May thisyear.

The credit card industry also has become slightly lesscompetitive lately, as big players like Chicago-based Bank Onehave been sidelined by internal troubles.

American Express customers charged about 6 percent more ontheir credit cards in the third quarter than they did in theprior-year period. Card-holders charged an average of $2,041each in the quarter, up from $1,935 a year ago.

The number of its cards in circulation rose to 50.4 millionfrom 44.8 million in the quarter.

The companys revenues rose to $5.55 billion in the thirdquarter from $4.92 billion last year. Its total billed businessrose to $74.8 billion, up from $64.1 billion a year ago.

At its travel-related services unit, which includes itscharge card business, American Express earned a record $507million in the quarter, up 14 percent from a year ago. Cardrewards program encouraged spending, and expanded merchantacceptance of its cards also helped, the company said.

Its Minneapolis-based investment advisory arm, AmericanExpress Financial Advisers, reported $269 million in profits,up 12 percent from last year. An increase in assets undermanagement boosted fee revenues, American Express said.BACK TO TOP