Lucent reorganizes as profits rise

Lucent Technologies reported a fourfold year-on-year increase in net income for the second quarter of its 2005 fiscal year, on revenue up 6 percent, and announced a reorganization of its network equipment business units.

The company reported net income of $282 million for the quarter ended March 31, for earnings of $0.06 per share. Net income was up 315 percent on the $68 million reported a year earlier. Revenue totalled $2.34 billion for the quarter, up 6 percent from $2.19 billion a year earlier.

Analysts had expected earnings of $0.04 per share and revenue of $2.31 billion, according to a poll of financial analysts conducted by Thomson First Call.

A tax refund contributed around $0.02 per share of the earnings, the company said.

Looking ahead, the company expects its revenue to grow faster than the market, increasing by 4 percent to 6 percent over the full fiscal year.

“The greatest near-term opportunity is wireless,” Chairman and Chief Executive Officer Patricia Russo told analysts and journalists during a conference call.

The market for fixed-line equipment remains “challenging,” she said, although she expects the decline in this sector to stop and revenue to stabilize at this quarter’s level.

“We have shifted our investment away from legacy products,” she said.

The company has cut its workforce by 800 employees since the start of the year, to 31,000 workers, Chief Financial Officer Frank D’Amelio said. Most of the 800 jobs cut were in the fixed-line business, which will lower expense levels in that sector, he said.

Despite declining revenue from legacy telecommunications products in the U.S. and from PHS (Personal Handyphone System) mobile phone systems in China, D’Amelio said he remains confident the company will achieve its target of “midsingle-digit percentage growth” in revenue this year.

To meet that target, the Murray Hill, New Jersey, company is reorganizing to address a decline in demand for its fixed-line networking equipment. Revenue at its Integrated Network Solutions (INS) business unit fell 18 percent over the last year, to $589 million. By merging INS with the Mobility Solutions business unit, where revenue rose 24 percent to $1.2 billion over the same period, Lucent hopes to cut costs and address a growing market for what it calls blended lifestyle services, it said.

The INS unit will now report to Cindy Christy, who already heads Mobility Solutions. The combined entity will be renamed the Network Solutions Group, the company said. Janet Davidson, formerly head of INS, will take on the new role of head of corporate strategy and business development.

Lucent’s services business will remain a separate unit. Revenue there rose 4 percent over the year, to $499 million.

The company announced one other personnel change: Bill O’Shea, president of Bell Labs, is retiring after 33 years with the company. He will be replaced by Jeong Kim, who is rejoining Lucent after almost four years’ absence. Kim was formerly chief executive officer of access networking equipment vendor Yurie Systems, acquired by Lucent for $1 billion in May 1998. He worked for Lucent until October 2001, before leaving to work on other projects.