Can Lucent Come Back?

ByABC News
July 30, 2001, 12:36 PM

N E W   Y O R K, July 31 -- Residents all over the northeastern United States reported seeing a mysterious giant fireball in the sky that exploded as it fell to Earth last week. It wasn't Lucent Technologies, but it could have been.

On July 24, the prominent telecommunications equipment maker, headquartered in Murray Hill, N.J., announced a quarterly loss of $3.25 billion, the cutting of up to 20,000 jobs for a total of about 40,000 this year and the elimination of its dividend.

And that was only the latest part of a spectacular flameout in 2001, as the once-soaring company struggles to remain airborne. Lucent has registered huge losses, fired tens of thousands of employees and unloaded divisions in a near-fire sale.

As a result, Lucent's widely held stock, which reached a high of nearly $78 in December 1999, is now hovering around $7. Far removed from being a market darling, the main question about Lucent now is whether the company can come back at all.

But Some Analysts Are Sanguine

Lucent's problem? Huge investments and spending, as well as loans extended to clients, are weighing it down now that the Internet-fueled telecommunications boom has sputtered. The company is also taking a $9 billion charge against earnings this quarter to cover investment losses and carries $3.7 billion in debt.

In an attempt to reduce this burden, Lucent just unloaded its fiber-optics business to Japanese company Furukawa for $2.75 billion. That is perhaps half of the figure Lucent had originally hoped to get.

Lucent even announced the $51 million sale of its company golf course in New Jersey this week having spent $40 million purchasing and developing the links over the last three years.

But it also announced a delay in the initial public offering of subsidiary chip-maker Agere, a spin-off founded essentially to relieve Lucent of its crushing debt load.

Still, despite all the bad news, some Wall Street analysts are fairly sanguine about Lucent's prospects. The stock rose slightly late last week, thanks in part to a favorable research report by analyst Steven Levy of investment bank Lehman Brothers in New York, who upgraded his rating of the stock from "neutral" to "strong buy."