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Lucent Sees Further Growth, Acquisitions
Reuters
GENEVA — Lucent Technologies Inc., the world's largest telecommunications equipment maker, expects its revenue and profit to continue growing strongly and sees more acquisitions in areas of wireless and data networking.

"Taking (market) share and growing substantially the top line would put us in the mid-$40 billion dollar range for (revenues) next year," Lucent Chairman Rich McGinn told Reuters on Monday in an interview at the Telecom 99 trade show in Geneva.

Lucent expects its revenues in 2000 to grow about three to five percentage points above the average market growth rate of 14 percent to 15 percent.

It was also comfortable with Wall Street's consensus earnings estimates. According to research firm First Call, analysts expect Lucent to earn $1.20 a share in 1999 and $1.51 a share in 2000.

In the third quarter ended June 30 1999, revenues was $9.32 billion, a rise of 22 percent over the previous third quarter.

Lucent has been working aggressively to shift from its past focus on telephone equipment to the new, converging markets for voice, data and video communications. It will continue to grow through acquisitions, as well as through its own sales and research and development efforts, McGinn said.

"We are boringly consistent here — we are very much focused on both organic growth through R&D; (research and development) and (sales) channels, as well as in acquiring very talented people, emerging technologies and some market positions," he said.

Lucent expects to spend about 11 percent to 12 percent of its revenues on research and development in 2000.

Future Acquisitions in Fast Growing Segments

Future acquisitions will focus on fast-growing segments of the market, such as wireless, data networking, optical, software and software-based switching and semiconductors, McGinn said.

Lucent's wireless business is already growing at a very fast rate more than 20 percent — and is now among the company's largest businesses, McGinn said. Lucent has announced over $1 billion in wireless contracts in the past 10 days.

The wireless business could see even more growth if China embraces CDMA (Code Division Multiple Access) wireless technology, in addition to the GSM (Global Standard for Mobile Communication) standard, McGinn said.

"They (China) have given indications but not solidified that position at this time. If and when that might happen, it would be another spurt of growth for us," he said. Lucent is among the leaders in providing CDMA equipment.

Microelectronics or semiconductors is another fast-growing unit as Lucent targets the more lucrative, communications segment of the chip industry. The unit historically has grown at about 20 percent a year and that growth rate is expected to continue, McGinn said.

Internationally, Lucent continues to see strong demand and to gain market share. It has seen strong growth in Brazil and throughout Latin America, as well as in Asia. International sales comprise about 27 percent of Lucent's total revenues.

"We are so under-represented outside the United States that while some of our competitors might be seeing flat market situations for themselves, what we're seeing that with every new customer and new order, it's an upside for us," McGinn said.

Some Units Need Improvements

The enterprise unit — which sells communications equipment to large corporations — increased sales only about four percent in the third quarter and continues to lag behind other faster-growing units.

Sales of PBX (private branch exchange) systems and equipment sales to small businesses remain slow, but corporate areas, such as sales of call centers and messaging services, have been growing very fast, McGinn said.

"We expect to extend our lead in call centers and messaging.to raise the profile and growth of that business," McGinn said.

In August, Lucent canceled an agreement to sell its U.S.-based sales group that targets small and mid-sized businesses because it could not agree on terms with the buyer. Since then, Lucent has continued to look at alternatives for that unit.

"We're seriously looking at other alternatives. I would expect a resolution would occur in the near future. We will either decide that the productivity of that business has improved and has the potential to keep improving or that we will be working on an agreement with another firm," he said.

McGinn also said he remains dissatisfied with the growth of Lucent's Systimax operations, which provide cabling systems for corporate campuses.

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