Goldman Sachs: No “Major” New Conclusions from Lucent

Struggling telecom maker Lucent Technologies says it still plans to make money by the end of 2002. Investment banker Goldman Sachs, however, is nonplused.

In Lucent’s mid-quarter conference call on Thursday, company 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.

Goldman Sachs analysts Natarajan (Subu) Subrahmanyan and Thayer Heath, though, wrote in a report that the operational progress Lucent needs to make to reach its 2002 goals is “unclear given the one-time charges in June results that were not quantified.” The analysts did say that the new information shows definite progress versus Lucent’s situation in its last quarter.

“While our street-low estimates may prove to be conservative we are maintaining them until ’02, visibility and our understanding of the operating numbers at LU improve,” the analysts wrote.

As it stands, Goldman Sachs’ estimates that Lucent will report a loss of $0.62 a share for 2002’s first fiscan quarter, and $0.47 a share for the same fiscal year’s second quarter.

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