Lucent eyes reverse split to avoid stock's delisting

Investors' approval to be sought in Feb.

October 19, 2002|By BLOOMBERG NEWS

MURRAY HILL, N. J. - Lucent Technologies Inc., which has fallen from industry bellwether to penny stock in less than three years, said yesterday that it will seek approval for a reverse share split so that it can remain listed on the New York Stock Exchange.

The board of the largest U.S. maker of telephone equipment will set a split ratio to create a stock price of $15 to $25. Lucent will seek investors' approval for the split at its annual meeting in February. The shares fell 7 cents, to 63 cents, on the New York exchange.

"They really didn't have any choice but to do this reverse split," said Shawn Campbell, an analyst at Northern Trust Corp., which owned 13.6 million Lucent shares as of June. "It doesn't change anything about the company."

Lucent follows rival Nortel Networks Corp. and former parent AT&T Corp. in seeking reverse splits after their shares tumbled along with demand for phone gear and services.

Lucent has tallied $26 billion in losses in the past nine quarters and has announced plans to shed 91,000 jobs since September 2000. Some investors have said the company might run out of cash by December next year.

Thursday, Lucent's average closing price for the past 30 trading days fell below $1, violating a New York Stock Exchange listing requirement. The exchange gives a company 10 days to explain how it will increase its share price.

On Oct. 11, Chief Financial Officer Frank D'Amelio said Lucent might initiate a reverse split to help bolster the share price and avoid breaking the exchange's rule. "We are not going to be delisted," he said.

Reverse splits are intended to increase the stock price by reducing the number of shares outstanding. They have no impact on a company's stock market value. Lucent had 3.43 billion shares outstanding at the end of July.

"You've still got to address the reason why your stock is going down," said RBC Capital Markets analyst John Wilson, who has an "underperform" rating on Lucent shares and doesn't own them. "The fundamental challenge for the company is still to get back to earnings, and can they finance themselves until that point?"

Last month, Lucent said sales would drop as much as 25 percent in the fiscal fourth quarter, which ended Sept. 30, from the third quarter's $2.95 billion.

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