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Analysts: Lucent short on cash

Wed, 10/16/2002 - 8:00pm
Emma Moody

Copyright 2002 The Morning Call, Inc.

The Morning Call (Allentown)…10/16/2002

From LexisNexis

Lucent Technologies Inc., once the world's biggest seller of telecommunications equipment, may be completely out of money within 15 months, analysts say.

Merrill Lynch analyst Tal Liani predicts Lucent will spend its entire $4.4 billion cash balance before the end of next year. CIBC World Markets analyst Steve Kamman figures it could be earlier. Wachovia Securities' Stephen Koffler forecast a "dangerously low" cash level within a year.

But Lucent Chief Executive Officer Patricia Russo insists the Murray Hill, N.J., company won't run out of money.

"We have more than sufficient liquidity to fund operations," she said during a conference call Tuesday with analysts and investors.

Russo, who is slashing thousands of jobs to keep Lucent solvent, predicts the company will have more than $2 billion in cash on Sept. 30, 2003. She also said Lucent will have pared its losses by then.

Analysts say it's just as likely that Lucent, which began its fiscal year Oct. 1 with $4.4 billion, will need extra financing, break up or file for bankruptcy.

"Next year will be a terrible year, and I'm not sure the company is ready for that," said Merrill's Liani, who has a "neutral" rating on Lucent shares and doesn't own the stock.

Lucent and analysts differ over how much further sales will slide in the next 12 months. Russo said Friday she is bracing for a 2003 decline in the "20 percent range," indicating annual sales may fall as low as $9.8 billion.

Lucent intends to return to profitability, before certain costs, with quarterly sales of $2.5 billion at some point in fiscal 2003.

CIBC's Kamman said his figures indicate Lucent will have used up the $4.4 billion by the middle to the end of the 2003 calendar year and will have to rely on bank loans. He rates Lucent stock "underweight" and doesn't own the shares.

Shareholders probably will be the biggest losers if there is any financial restructuring. Typically, shareholders receive nothing in a bankruptcy. Any sale of Lucent businesses probably will fetch low prices, Wachovia's Koffler wrote in a report.

"It's difficult to see there's any way that you would want to own equity in this scenario," Kamman said.

Lucent's cash balance is almost three times as much as the $1.5 billion it had two years ago, but staggering losses are forcing the company to burn through that cash quickly.

Lucent lost $16.2 billion in fiscal 2001 and has lost another $9 billion during the first nine months of fiscal 2002.

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