Lucent Technologies reviews the service provider market and its strategy to stay in it

Aug. 24, 2001--At its analyst session this week, Lucent Technologies reviewed changes underway in the service provider market and how the company's strategy and Phase II business restructuring program align Lucent with the most attractive opportunities that are available.

At its analyst session this week, Lucent Technologies (NYSE: LU) reviewed changes underway in the service provider market and how the company's strategy and Phase II business restructuring program align Lucent with the most attractive opportunities that are available.

Lucent is focusing its efforts on the world's largest service providers, a strategy that generated a strong revenue performance in a very difficult market in the third fiscal quarter of 2001. During its analyst session, Lucent provided details on how service providers are consolidating, aligning themselves around wireline and mobility opportunities and expanding globally. The company discussed how its new business model is strategically aligned with these market dynamics.

Lucent also said that, for fiscal year 2002, the company's addressable market likely would remain flat. Lucent expects to return to profitability a quarter ahead of when it achieves positive operating cash flow in fiscal year 2002. In addition, Lucent said that the quarterly break-even revenue number for fiscal year 2002 would be approximately $4.75 billion. Lucent expects this level to improve modestly, over time, as the remaining portion of the company's restructuring actions is implemented.

The company also reaffirmed its previously stated guidance for the fourth fiscal quarter of 2001 in which it expects to deliver sequential improvement in the bottom line but, due to market uncertainties, the company is no longer providing guidance for the top line.

Given reasonable market conditions, Lucent expects to achieve the following:

* Revenue growth of 10 to 12 percent per year;

* Gross margins of 35 percent;

* R&D spending at 12 percent of revenues;

* Marketing and Sales spending at 9 percent of revenues; and

* General and administrative spending at 4 percent of revenues.

As part of its restructuring efforts, Lucent is eliminating product redundancies and focusing its R&D investment on the most important growth opportunities for its key customers. The company said it would aggressively invest in and deliver optical solutions for core and metro markets; packet data solutions (multi-service core, edge and access; circuit and packet voice solutions); second-generation and third-generation wireless solutions; and the software and services to support all of these solutions.

Lucent also discussed the continuing improvements it is making to its approach to vendor financing. Specifically, the company has implemented more frequent monitoring of the credit quality of its customers and has been taking reserves on every draw, which is a more frequent basis than it had been using previously.

Compared to the end of fiscal year 2000, Lucent's overall total vendor financing exposure is down 32 percent. In addition, because the company is now solely focused on the world's largest service providers, Lucent's vendor financing totals will continue to decline because these customers typically do not request financing.

About Lucent Technologies:

Lucent Technologies, headquartered in Murray Hill, N.J., USA, designs and delivers networks for communications service providers. For more information, visit www.lucent.com.

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