Lucent: Negativity Over Wireless Tech Unwarranted

NEW YORK -(Dow Jones)- There remains growth opportunity in one wireless standard, CDMA and Lucent Technologies will be able to take advantage of that potential, Chairman and Chief Executive Pat Russo said.

"We believe negative speculation about the CDMA market, and Lucent, is unwarranted," she said during a Wednesday conference call to discuss the company's fiscal third-quarter results.

There has been skepticism over prospects for CDMA, a wireless standard used by Verizon Wireless and Sprint Nextel Corp. in the US, as well as carriers in Latin America and Asia. The slowdown in spending on CDMA is one the primary reasons why Lucent has fared poorly over the past two quarters. The rival standard, GSM dominates the European market and is more widely used.

But Russo believes the market for CDMA2000 will remain steady or increase slightly through 2010. Within that market there are "pockets of growth" that Lucent will exploit. "The results reflect an impending shift in current spending in mobile customers in the U.S., and is not indicative of longer prospects," she said.

Many of Lucent's customers have upgraded, or will upgrade, their CDMA system to a 3G standard called evolution-data optimized, or EV-DO. Additional opportunity comes from many of those carriers' commitment to upgrade their network further in 2007, Russo said.

China represents another major customer. The country is awaiting the long-delayed granting of its 3G licenses, which should kick-start spending in the region.

Lucent has agreed to be acquired by Alcatel and expects the deal to close by the end of the year.

The Murray Hill, N.J., maker of telecommunications equipment reported fiscal third-quarter net income fell to $79 million, or 2 cents a share, from $372 million, or 7 cents a share, a year earlier. The steep fall was due to gains from tax items and the recovery of bad debt in the year-earlier period.

The results were in line with Lucent's profit warning earlier this month, but still one cent shy of analysts' average estimate.

Revenue declined to $2.05 billion from last year's $2.34 billion, as a drop in product revenue more than offset a gain in service revenue.

On the rival wireless GSM technology, Chief Operating Officer Frank D'Amelio said that Lucent has been aggressively deploying a next-generation version of the network, and doesn't see a delay in the rollout of the equipment. "We're going full speed ahead," he said.

Lucent expects the fourth quarter to be the "highest quarterly revenue period for fiscal year 2006 by a significant margin." The company believes revenue from its wireless business will be a major driver in the period. Russo, however, said she couldn't speculate on whether there would be a year-end budget flush, since she had no indication of one either way.

D'Amelio added that Lucent continues to go after the emerging market arena, but that pricing remain aggressive. "We're going after it selectively," he said.

On the company's headcount, Lucent lost about 300 workers for the first half of the year, which includes additional work force absorbed from an acquisition. It remains on track to cut roughly 1,000 workers for the calendar year.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

(END) Dow Jones Newswires "

Posted to the site on 26th July 2006