Amid weeks of speculation and analyst prodding, Lucent Technologies Inc. announced plans to spin off its $4 billion microelectronics business. The company is planning an initial public offering for up to 20 percent of the new company in the first quarter 2001, with the remaining shares expected to be spun off in a tax-free distribution by next summer.
“The communications components business will now be given the opportunity to achieve its full potential as it becomes freed from the strategic conflict if faced as part of Lucent,” said Richard McGinn, Lucent chairman and chief executive officer.
Lucent said pro forma earnings per share increased 30 percent to 30 cents a share, or $1 billion, for its third fiscal quarter ended June 30. This compares with 23 cents per share, or $732 million, in the year-ago quarter.
Lucent’s stock took a beating Thursday, however, as it warned of slower growth. It fell $10.50 to close at $54, a decrease of 16.28 percent.
Lucent said it expected revenues from continuing operations to grow 20 percent in the first fiscal quarter of 2001; it anticipates a 15-percent decline in pro forma earnings per share for the same period. This is due to a major shift from higher-margin switching products to newer products with initially lower margins associated with the ramp-up of new products. Dilutions from the acquisitions of Chromatis and Ortel will also impact bottom-line results for the quarter, Lucent said.
Service provider revenue, which includes wireless networks, grew 16 percent. UBS Warburg L.L.C., which maintained its “hold” rating on the company, noted that revenue growth in this sector was hurt by weak sales overseas and weak sales overall in circuit-switching products. Total overseas sales were up just 4 percent primarily due to a large decline in sales to Saudi Arabia for circuit-switching and wireless systems, said the firm.
“The lack of a meaningful GSM presence globally outside of Saudi Arabia has hurt wireless growth overseas for Lucent,” said UBS Warburg. “In addition, the decision by China not to go with CDMA has hurt Lucent’s wireless growth prospects.”
Lucent will trade in the range of $50 to $65 until there is a positive turnaround of its service provider business, said the firm.
