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Lucent: We'll Be Profitable by End of 2002

Struggling telecom maker Lucent Technologies still plans to make money by the end of 2002, even as the rest of the telecommunications sector struggles with a sagging economy and diminishing revenues.

In its mid-quarter conference call, Lucent officials said they believe the company's market will remain roughly flat for fiscal year 2002. Even so, Lucent expects to return to profitability a quarter ahead of when it achieves positive operating cash flow in fiscal year 2002, officials said. In addition, Lucent said that the quarterly break-even revenue number for fiscal year 2002 would be approximately $4.75 billion. Lucent also expects this level to improve modestly, over time, as the remaining portion of the company's restructuring actions is implemented.

The company also reaffirmed its previously stated guidance for the fourth fiscal quarter of 2001 in which it expects to deliver sequential improvement in the bottom line. Due to market uncertainties, however, Lucent said it would no longer provide guidance for the top line.

In terms of product direction, Lucent said that it was eliminating product redundancies and focusing its research and development (R&D) investment on the most important growth opportunities for its key customers, as part of its restructuring efforts. The company said it would aggressively invest in and deliver optical solutions for core and metro markets; packet data solutions (multi-service core, edge and access; circuit and packet voice solutions); second-generation and third-generation wireless solutions; and the software and services to support all of these solutions.

Lucent also said it is improving its approach to vendor financing; specifically, the company has implemented more frequent monitoring of the credit quality of its customers and has been taking reserves on every draw, which is a more frequent basis than it had been using previously.

Lucent's overall total vendor financing exposure is down 32 percent, compared to the end of 2000's fiscal year. Also, Lucent said its vendor financing totals will continue to decline because the company is now solely focused on the "world's largest service providers," who typically do not request financing.

In 2003, Lucent said it expects to achieve revenue growth of 10 to 12 percent per year, gross margins of 35 percent, R&D spending at 12 percent of revenues, marketing/sales spending at 9 percent of revenues, and general/administrative spending at 4 percent of revenues. The company would not predict exactly when in 2003 it would reach those levels--that depends on "market conditions," officials said.



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