Lucent denies bankruptcy rumours

No one can argue that Lucent Technologies Inc. is up against the ropes. While the rest of the networking industry was enjoying healthy growth for most of last year, Lucent was floundering, dealing with disappointing sales and earnings and issuing warning upon warning.

Chief Executive Officer (CEO) Rich McGinn’s head rolled as a result.

Lucent’s problems are compounded now that the entire industry is in a slump. The company is attempting a turnaround with a US$6.5 billion line of credit, but now no one’s buying anything from anyone. Even companies that had stellar financials while Lucent was struggling are feeling the pinch.

Now rumours have surfaced that Lucent is headed for bankruptcy, which sent its shares spiraling downward last month. Lucent has vehemently denied the rumours in a statement released to squelch the ensuing panic.

“The rumours that Lucent is filing for bankruptcy are baseless and irresponsible,” Lucent Chief Financial Officer (CFO) Deborah Hopkins said. “We will report, in detail, on the progress we are making when we issue our results for the second fiscal quarter of 2001 later [in April].”

Some analysts have also expressed doubt that Lucent would go to such drastic lengths as declaring bankruptcy. Indeed, it seems highly unlikely that Verizon would place a US$5.6 billion order for wireless infrastructure with Lucent if the company was going down.

But some very visible industry pundits who attended a Network World (US) soiree last month expressed some doubt that both Lucent and Nortel would be left standing at year-end. They would not venture a guess on which one would be, however.

If the bankruptcy rumour were true, Lucent’s customers, suppliers, business partners and competitors would have gotten wind of it long ago. Verizon would not have placed such a huge order with the company.

It seems like this one could be out of left field, but let’s see what the company says later this month. It should be a very interesting earnings call.