Telecom equipment vendors posted fiscal first-quarter results and watched their stocks react accordingly.
Thanks in part to a $278 million bankruptcy lawsuit ruling, Lucent Technologies Inc. posted a first-quarter net loss of $104 million, or 2 cents per share.
The telecom equipment maker said the ruling of 6 cents per share was ordered by a federal bankruptcy court in a case involving bankrupt broadband provider Winstar Communications Inc. Lucent has filed an appeal to the court’s ruling.
Interestingly, excluding the $287 million ruling and other one-time charges, the company exceeded analyst expectations, posting a profit of 4 cents per share. UBS Investment Research estimated Lucent would post only a 1-cent-per-share profit.
Lucent reported net income of $174 million, or 4 cents per share, in the same quarter a year ago. Revenue for the company’s first quarter slipped to $2.05 billion, down 12 percent from $2.34 billion a year ago.
Wall Street didn’t seem surprised by the earnings shortfall as Lucent’s stock was trading down 1 cent from its opening price of $2.51 after the news.
“Based on the review of our expectations for fiscal 2006 and ongoing interactions with our customers, we are confident that our revenue performance will be much stronger for the remainder of the year,” said Patricia Russo, chairman and chief executive officer at Lucent.
In early January, Lucent warned investors that its revenue forecast for the quarter would fall short due to a slowdown in spending by Verizon Communications Inc. and Sprint Nextel Corp., as well as sputtering sales in China.
“We have continued to strengthen our position in next-generation networks this quarter by winning three more IMS contracts, and we are conducting an extensive lab trial with Verizon on a wide range of elements from our IMS solution,” said Russo. “We continue to pursue those market opportunities that align with our strengths and investments in IMS, 3G mobile networks, services, next-generation optical and access and applications.”
Lucent said its IMS products made strong wins during the first quarter, noting deals with Cingular Wireless L.L.C., AT&T Inc. and BellSouth Corp.
UBS said Lucent’s results for the remainder of the year depend primarily on gaining share with Cingular, as well as from third-generation network construction in China.
Lucent’s first-quarter operating expenses totaled $940 million, or $662 million excluding the Winstar judgment. Last year’s first quarter saw operating expenses of $665 million.
The company’s gross margin for the quarter was 42 percent of revenues as compared with 46 percent in the fourth quarter of 2005 and 42 percent in the year-ago quarter.
“Lucent has been through a rough few years, and just as we think they are coming out of it, we now have to deal with these disappointing numbers,” commented Jeff Kagan, telecom industry analyst. “The question is, will Lucent be able to turn this around, or is this decline something they, and investors, have to deal with from now on.”
Siemens
Siemens AG delivered not-so-strong first-quarter results, posting a 19-percent net profit decline. But Wall Street turned the other cheek, focusing instead on the company’s new orders valued at $32.8 billion, a 31-percent increase from $20.4 billion in new orders a year earlier.
The company’s stock was boosted to its biggest gain in more than two years, rising to $91.43 last Thursday morning after closing the previous day at $86.31.
“The first quarter demonstrates that Siemens’ business portfolio delivers strong growth on the combination of innovative solutions, strong presence in growth markets and acquisitions,” said Klaus Kleinfeld, chief executive officer at Siemens.
The company reported net earnings of $998 million, down $1.22 billion from a year ago and a disappointment for analysts, who largely forecasted net income of $1.1 billion.
In 2005, Siemens cut some 7,000 jobs and pulled out of mobile-phone production, transferring its money-losing division to BenQ Corp. of Taiwan.
Qualcomm
While wireless chip titan Qualcomm Inc. posted strong first-quarter results, the company’s stock initially slipped slightly downward due to warnings of slowing sales in its second quarter.
Qualcomm posted $620 million in net income, or 36 cents per share, for its fiscal fourth quarter, up 21 percent from net income of $513 million, or 30 cents per share a year earlier. Revenue rose 25 percent to $1.74 billion from $1.39 billion a year ago.
“The earnings are pretty good, but people are worried about the company’s guidance,” noted Albert Lin, telecom analyst with American Technology Research. “There’s a big difference between Qualcomm’s and some other companies’ views of how many W-CDMA handsets will be sold in 2006. Companies like Motorola Inc., Texas Instruments Inc. and RF Micro Devices Inc. estimate that 100 million W-CDMA handsets will be sold. But Qualcomm says only 86 million will be sold-that’s a spread of 14 million units.”
Qualcomm said it is sticking with its guidance.
“I’m pretty pleased,” said Bill Davidson, head of Qualcomm’s investor relations. “It’s early in the year and there’s a lot left to unfold. CDMA is more mature than W-CDMA, and predicting the W-CDMA market is not an exact science. I don’t think of our guidance as conservative, I think of it as us being cautious. Our goal is to try and be accurate.”
Wall Street didn’t seem too rattled by the company’s conservative projections. Qualcomm’s stock climbed from $46.75 per share to $47.71 last week in trading after the news.
