Lucent struggles to secure credit: report

Lucent Technologies Inc. is having trouble securing a US$6.5 billion line of credit to put the company on a more stable footing, according to an article published Friday.

The telecommunications equipment provider is seeking a US$4.5 billion 364-day credit facility and an amendment to an existing $2 billion five-year revolving credit facility that matures in 2003, said Michelle Davidson, a company spokeswoman. Lenders are concerned, however, about Lucent’s finances after it posted a $1.02 billion loss for the first quarter 2001, according to a story in The Wall Street Journal Friday.

Lucent had little comment on the Journal story, saying only that the company is moving forward with negotiations with lenders, and that those negotiations are expected to conclude Feb. 22, Davidson said. Gaining the $6.5 billion line of credit is part of a seven-point restructuring plan announced in January to reduce company costs by $2 billion annually and increase Lucent’s working capital by $2 billion, she said.

According to an analyst quoted in the Journal story, Lucent also is considering the sale of some assets, possibly its fibre-cable unit. Davidson said Lucent had no comment about this assertion. As of Dec. 31, 2000, Lucent had $3.8 billion in cash or cash equivalents, according to its balance sheet.

Lucent’s apparent financing problem drew mixed reactions from analysts. Financing trouble could potentially slow the pace of Lucent’s development of its 40G bit/per second DWDM (Dense Wave Division Multiplex) optical technology that is expected to hit the streets in 2002 and 2003, said Chris Nicoll, a vice-president at Current Analysis Inc. in Sterling, Virginia. It is four times faster than existing technology used over fibre optic backbones and it is crucial for Lucent to get the technology to market on time because it was beat to the punch on the current 10G bit/ per second technology by Nortel Networks Corp. and Ciena Corp.

The outlook for Lucent overall is still positive, another analyst said.

“Lucent for the most part, as far as financials, is still healthy and from the technology standpoint with the actions they have taken recently they should be back on track in the next 12 to 18 months,” said Jay Patel, a senior analyst for digital communications at Yankee Group Inc.

Lucent, in the past year, has had an attractive technology portfolio, but could not meet the market’s demand, Patel said. This was particularly evident with the 10G bit/per second optical technology where Nortel Networks ate into Lucent’s market share, he said. Lucent sought to grow its overall business at a faster rate than it could sustain, in an attempt to meet quarterly earnings goals, company executives have said.

The Murray Hill, N.J.-based company also is dealing with an investigation of its accounting practices by the U.S. Securities and Exchange Commission (SEC). Federal regulators began looking at Lucent’s financial books after the company trimmed its revenue for the fourth quarter of 2000 by $125 million after it discovered a “revenue recognition” issue. In December, Lucent announced it was actually a $679 million revenue reduction. Lucent is cooperating with the SEC and sharing information about the accounting discrepancy, Davidson said.

Lucent has gone through some turbulent financial times recently. In October, the company ousted Rich McGinn as chairman and chief executive officer. The company, at the time, said it needed to change its leadership after five quarters of not meeting its earnings forecasts. Henry Schacht who served as the company’s top official from 1995 to 1997 replaced McGinn. Schacht is serving as chairman and CEO until the company locates a new chief.

Lucent shares were down $0.85, or 6.24 per cent, to $12.77 a share in afternoon trading Friday.

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