Lucent shares tumble on report of SEC investigation

Shares of Lucent Technologies Inc. (LU) fell steadily Friday morning on the New York Stock Exchange after a report in The Wall Street Journal said that the U.S. Securities and Exchange Commission (SEC) is investigating the once soaring networking company for possible fraudulent accounting practices.

Lucent alerted the SEC to possible irregularities in November of last year when it first discovered problems during a review of its year-end financial statement, company spokeswoman Michelle Davidson said Friday. As a result, Lucent announced in December that it would adjust US$679 million in revenue for the fourth quarter of fiscal 2000. The company issued news statements both in November and December and has been forthcoming about the matter, Davidson said.

“We voluntarily brought these issues to the SEC’s and to the public’s attention then,” she said. “This is not new.”

But that didn’t stop the company’s stock price from being pounded. Shares closed on Thursday at $16.89, but dropped with the opening bell Friday and continued the decline through the first hours of trading. At 11 a.m., the share price was down to $15.17 after starting the morning at $15.85. The low for the day hit $15 during early trading. Shares have traded as high as $70.66 in the last 52 weeks and as low as the $12.19, recorded on Dec. 12.

While the company can’t speak for the SEC – or indeed confirm a probe is under way – Davidson said that Lucent is cooperating “voluntarily and fully” with the agency.

“We’ve been in an open dialogue with them since then,” she said of the November notification of irregularities.

The Journal article quotes “people with knowledge of the investigation” saying that the SEC is focusing on the $679 million and is investigating how the company booked sales, particularly regarding one-time customer discounts, and how it handled software licensing deals.

Lucent has been contending with turmoil for months. Last October, it announced that Chairman and Chief Executive Officer (CEO) Richard McGinn had been fired and issued an earnings warning for the fourth quarter. McGinn’s ouster came as the networking market generally soured, but Lucent, once a Wall Street darling and an example of the New Economy’s lustre, had made a series of missteps that kept if from quickly getting key products to market.

Soon after McGinn was fired, the company announced that top management was restructured, integrating sales and service, and that it would cut jobs. The company last month further announced it would eliminate 10,000 jobs.

Lucent was spun off of AT&T Corp. in September 1996 and soon emerged as a key vendor of networking and telecommunications equipment.

A spokesman with the SEC did not immediately return a phone call seeking comment.

Lucent, in Murray Hill, N.J., can be reached at