Lucent bankruptcy rumors put fragile market in panic
USA Today
A few months ago, investors would have scoffed at the notion of Lucent Technologies going bankrupt.
Yesterday, they panicked.
Shares of the telecom-equipment giant plunged 30 percent at one point to an all-time low as the rumor rattled Wall Street.
Lucent denounced the rumor as "baseless and irresponsible," and the shares, in heavy trading, closed at $6.75, down 14 percent. That's the same price the stock was first offered at, adjusted for splits, in 1996.
While most Wall Street analysts dismiss the possibility of bankruptcy, the level of investor angst underscores the amount of skepticism surrounding Lucent's ability to fix itself. Not helping matters is the backdrop of slowing demand for network systems that's starting to cripple even Lucent's toughest competitors.
Lucent insists it can pull off a turnaround. It has made broad job and product cuts.
Hatched from AT&T in 1996, Lucent ranks as one of the world's biggest telecom-equipment providers, with about $30 billion in revenue. It once dominated the sector, but has lost market share to such rivals as Nortel Networks and Ciena.
It lost $1.02 billion in the first quarter of 2001 and faces a U.S. Securities and Exchange Commission probe into its accounting methods.
The company's stock, among the most widely held, is down 90 percent from its 52-week high. Analysts polled by First Call/Thomson Financial expect a loss of 60 cents a share this fiscal year. They don't expect a quarterly profit until early 2002.
For this stalwart, steeped in phone-company tradition, the more subtle cultural changes may determine whether it thrives or wallows. Lucent says it is making progress. Products are being pushed out the door faster. Every expense, down to employee cell phone bills, is being scrutinized.
And chief executive officer Henry Schacht, Lucent's first CEO who returned in October, is canvassing the nation to repair damaged customer relationships.
"This is a question of performing a lot and talking a little," says Schacht, who replaced the fired Richard McGinn. "This is about doing the basics."
The situation could worsen if Lucent's customers, several of which are running low on money, default on loans they received from Lucent to pay for equipment, analysts say. Last month, it restructured a $425 million pact with customer TeleCorp PCS to spread the deal out over more time.
