Bankruptcy rumors salted Lucent Technologies Inc.’s open wounds Wednesday, sending its stock plummeting as much as 30 per cent in morning trading, and closing down 13.63 per cent at US$6.78 a share.
Although Lucent has been plagued by a wave of ailments recently, including financial troubles, layoffs, and an accounting investigation by the U.S. Securities and Exchange Commission, company representatives adamantly deny that they are preparing to file for Chapter 11.
“The rumors that Lucent is filing for bankruptcy are baseless and irresponsible,” Lucent’s chief financial officer Deborah Hopkins said in a statement.
Company officials in the statement point to the narrowly-secured $4.5 billion new credit line recently arranged by J.P. Morgan and Co. Inc. and Salomon Smith Barney Inc. to pull them away from the brink, noting that they are already seeing positive results from their restructuring program.
“They are such a … large company, it’s hard for me to believe they would file bankruptcy,” said Bernard Elliot, a research director at Gartner Group Inc. “I would be very surprised.”
It is not clear where the bankruptcy rumors sprang from, although a Lucent spokesperson claimed that the news was being batted around the trading floor early Wednesday morning.
“The rumors could only have come from two sources: competitors or inside leaks,” Gartner’s Elliot said, adding that he believed it was probably spread by competitors.
Investors and Lucent users will most likely be eyeing the network giant closely over the next few months to see how adept the company is at using its new credit to strike a turnaround. The severity of Lucent’s troubles came to light early this year after the company reported a $1.02 billion loss in the first quarter, leading it to cut some 10,000 jobs.
Lucent Technologies, based in Murray Hill, New Jersey, can be reached at http://www.lucent.com/.