Lucent Writes Off $69 Million in Customer Arrears

Lucent Technologies wrote off $69 million worth of debt from its customers in the latest fiscal year and set aside an additional $252 million to cover “doubtful” accounts.

The leading phone-equipment maker disclosed the surge in bad or questionable debts in its annual filing with securities regulators. Murray Hill, N.J.-based Lucent said most of the debt problems lay with upstart local phone-service companies and wireless providers.

The new figures are the latest in a series of negative developments at Lucent, a former Wall Street favorite that has dropped 82% of its stock value this year, or more than $200 billion. Lucent’s problems also illustrate the growing financial problems among various telecommunications companies.

Lucent has been aggressively financing purchases by its customers, racking up $1.3 billion in lending at the end of its 2000 fiscal year on Sept. 30, said company spokeswoman Michelle Davidson. A year before, Lucent had advanced $1 billion.

“We will continue to evaluate requests [for credit] on a case-by-case basis,” Davidson said. “We’re trying to focus it on the most critical emerging markets. We’re walking away from some of the business.”

Lucent had previously disclosed that it was adding to its reserves for bad debts, but it hadn’t said by how much.

A year earlier, the company had set aside $318 million on its balance sheet. After a reduction for the write-off and the added reserves, Lucent now has $501 million in allowance for potentially uncollectable accounts.

As a result of the stock’s slide, Lucent’s latest filing says, 74% of the stock options it has issued to employees are now “under water,” meaning that they are worthless at the current stock price.

Lucent slipped another 56 cents Thursday to $13.13. On Dec. 21, the stock touched a three-year low of $12.19.

Lucent’s shares began tumbling in January, when the company said profit in the fiscal 2000 first quarter fell short of analysts’ forecasts by a third.

The shares kept plunging as the company cut forecasts over the next three quarters, ousted Chief Executive Richard McGinn, restated sales and profit in the fiscal fourth quarter twice and has projected a 20% drop in revenue in the current quarter.

The company blamed improper recognition of sales for some of the restatements, and new CEO Henry Schacht pledged to cut $1 billion in costs in the current fiscal year.

Last week, Lucent said adjusted results for its 2000 fiscal year were $33.6 billion in revenue, with earnings of $3.1 billion, or 93 cents a share, from continuing operations. In 1999, Lucent earned $3.6 billion on $29.9 billion in revenue.

The long list of financial problems and worthless options have taken a toll: Lucent has said it is losing about 2,000 employees a month to rivals or to retirement.

A Lucent spokeswoman said the company has changed its compensation program to boost recruiting and employee retention. The company now pays out bonuses on a quarterly basis instead of yearly, grants more options to managers, and lets options vest gradually over four years rather than all at once after three.

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Times wire services contributed to this report.