Lucent Technologies Comments on Expectations for First Fiscal Quarter 2000 Earnings - Company Financial Information

Cambridge Telcom Report, Jan 10, 2000

Lucent Technologies (NYSE: LU) said Thursday that, based on preliminary estimates, it expects operating results for its first fiscal quarter of 2000 to be lower than analysts' estimates. The company expects to report revenues in the range of $9.8 to $9.9 billion for the quarter, which ended Dec. 31, 1999, flat with the prior year period(1) The company expects earnings per share for the quarter to be in the range of 36 to 39 cents compared to 48 cents for the year-ago quarter.(2)

"We are clearly disappointed with the results for the quarter," said Lucent Technologies Chairman and CEO Richard McGinn. "We still expect our revenues to continue to grow three-to-five percentage points faster than the overall communications networking market," McGinn said. "However, given the slow start for the year, we expect to be in the lower end of that range for fiscal 2000." Analysts estimate that the overall communications networking market is growing at about 14 percent a year. McGinn said the company expects bottom-line growth of approximately 20 to 25 percent for the fiscal year over last year's earnings per share of $1.20.

For the second fiscal quarter, the company indicated it expects top-line growth of approximately 12 to 15 percent over last year's level of $8.78 billion and bottom-line growth of approximately 25 to 35 percent over last year's 17 cents a share. The strongest growth is expected in the second half of fiscal 2000 as the company's newest optical, network access and semiconductor products ramp up for full volume and deployment.

The company attributed the lower than expected revenue and earnings for the first fiscal quarter to several factors, including:

* Faster than anticipated shifts in customers' purchases to Lucent's newest 80-channel DWDM optical product line and greater than expected demand for OC-192 capability on the 80-channel systems, which resulted in near-term manufacturing capacity and deployment constraints;

* Changes in implementation plans by a number of customers inside and outside the United States, which led to delays in network deployments by enterprises and service providers;

* Lower software revenues, reflecting an acceleration in the continuing trend by service providers to acquire software more evenly throughout the year. In the past, these purchases occurred primarily in the quarter ending December 31; and

* Preliminary results show lower than anticipated gross margins this quarter from ramp-up costs associated with introducing and implementing new products and lower software revenues.

The company expects the capacity and deployment issues to be resolved by the end of the second fiscal quarter as new product introductions are completed, production adjustments meet increased customer demand, and additional resources are added for deployment. The company also anticipates the major network deployments that were delayed to occur during fiscal 2000.

Lucent expects to announce first fiscal quarter earnings on January 20, 2000 after the close of trading on the New York Stock Exchange.

Lucent Technologies, headquartered in Murray Hill, N.J., USA, designs, builds and delivers a wide range of public and private networks, communications systems and software, data networking systems, business telephone systems and microelectronic components. Bell Laboratories is the research and development arm for the company. For more information on Lucent Technologies, visit its Web site at http://www.lucent.com.

(1) All items in both the 1999 and 2000 periods include the results of recent mergers with International Network Services and Excel Switching.

(2) All earnings per share reported in this release are diluted EPS figures.