Lucent Finds High Demand With Investors After Spinoff
A large chunk of AT&T; Corp. broke off Thursday, becoming Lucent Technologies Inc. and setting off an investor stampede for a stake in the biggest initial public offering of a U.S. company.
Investors pushed Lucent’s value up 13%, proof not only of interest in the growing communications equipment industry but a strong stock market.
Lucent’s 112 million shares were initially priced at $27 each, making the total offering worth $3.02 billion. Lucent’s stock reached $32 in the morning but drifted lower through the day to close up $3.625 at $30.625. It was the most active issue on the New York Stock Exchange, with more than 42 million shares traded. AT&T; stock closed down $1.25 to $62.875, also on NYSE.
“It’s very impressive that a deal of this size could take place without really hurting the rest of the market for new stocks,” said Ryan Jacob, director of research at IPO Value Monitor. “It’s a testament to how strong the market is right now.”
The previous largest IPO was Allstate Corp., the insurance company spun off from Sears, Roebuck & Co. in a $2.1-billion stock offering three years ago.
Lucent accounted for $21.4 billion of AT&T;’s $79.6 billion in revenue last year. It emerges as one of the nation’s 50-largest industrial companies and the second-largest communications manufacturer after Motorola Inc. It also is the dominant manufacturer of telephones and network switches in the United States.
The break is the first of two to occur this year at AT&T.; The company also plans to spin off its $8-billion computer manufacturing business, NCR Corp.
AT&T; has said it would cut 40,000 jobs during the breakup. About 22,000 of those are in Lucent’s operations, which also include computer chip manufacturing and the illustrious Bell Laboratories.
The company’s underwriters, led by Morgan Stanley and Goldman, Sachs & Co., had not been expected to take it public until next week. But interest in the stock was heavy with institutional buyers lined up four to five deep for each share.
In addition, the merger announced earlier this week by SBC Communications Inc. and Pacific Telesis Group threw more attention on telecommunications. And the prospect of a market downturn loomed around the monthly report on U.S. employment, due today.
But analysts attribute the strong reception for Lucent to the growth prospects for it and the telecommunications equipment industry.
“This is a market that grew 35% right through the last recession and it will grow through the next recession,” said Michael Murphy, editor of the California Technology Stock Letter. “They’re big enough that they’re extremely credible as a worldwide supplier.”
Just over half of Lucent’s revenue comes from selling telephone network switches and about a fourth is equipment used by companies for internal phone systems.
Freed from AT&T;, Lucent will be able to do business with competitors of AT&T;’s long-distance and wireless services. It has already made an arrangement with Sprint, the No. 3 long-distance company, to provide equipment for its wireless business.
AT&T; still owns 83% of Lucent’s overall 635.6 million shares. It will divide them among AT&T; stockholders later this year. When that happens, AT&T; investors will get approximately one Lucent share for every three AT&T; shares.
AT&T;’s breakup is the largest of a U.S. company since AT&T;’s long-distance and local operations were divided in a 1984 antitrust settlement. But even when it is done, AT&T; will remain the nation’s largest communications service company with more than $50 billion in annual revenue.
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Lighting the Way
AT&T;’s new telecommunications equipment spinoff, Lucent Technologies Inc., which this week completed the largest public offering ever recorded in the United States, saw its stock jump 13% on the New York Stock Exchange on Thursday. A brief look at the new company:
History: Lucent--which means “shining” or “giving off light”--was chosen as the equipment maker’s name from hundreds of suggestions by employees. Lucent, one of three firms formed by a restructuring of AT&T;, won’t be completely broken off from AT&T; until later this year.
Value: Analysts valued Lucent at $15 billion after Wednesday’s offering, when AT&T; sold 112 million shares of the company for $27 each--about 20% of the firm.
Products: Based in Murray Hill, N.J., Lucent will get 75% of AT&T;’s famed Bell Laboratories--the birthplace of the transistor and the laser--and other holdings including AT&T;’s network systems, business communications systems, consumer products, microelectronics and multimedia divisions.
Financials: Lucent reported a loss of $867 million in 1995--stemming from restructuring costs tied to major layoffs--on revenue of $21.4 billion.
Sources: Times staff and wire reports
Researched by JENNIFER OLDHAM / Los Angeles Times
Lucent Leads List
Lucent Technologies Inc., the initial public offering of AT&T; Corp.’s equipment-making arm, tops the list of biggest U.S. initial stock sales. The top 10 IPOs:
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Company Value, in billions Date Lucent Technologies Inc. $3.0 April 1996 Allstate Corp. 2.1 June 1993 Conrail Inc. 1.6 March 1987 PacTel Corp. 1.4 Dec. 1993 Henley Group Inc. 1.3 May 1986 Lyondell Petrochemical Co. 1.2 Jan. 1989 Coca-Cola Enterprises Inc. 1.2 Nov. 1986 Nabisco Holdings Corp. 1.1 Jan. 1995 TIG Holdings Inc. 1.0 April 1993 First Data Corp. 0.96 April 1992
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Source: Securities Data Corp.
