Lucent Reportedly Weighs Spinoff

Lucent Technologies Inc., the world’s biggest telecommunications equipment maker, is preparing to spin off its microelectronics unit in a deal worth up to $40 billion, Business Week’s Web site reported Wednesday.

Officials at Murray Hill, N.J.-based Lucent declined to comment on the report.

A deal to spin off the microelectronics unit, which makes computer chips, lasers and other components used in a variety of Lucent equipment, is expected to be announced within weeks, Business Week said.

Reports that Lucent may have been seeking to create tracking stocks for its optical networking or microelectronics units have been swirling since late last year.

Among the gems in the microelectronics unit, headquartered in Allentown, Pa., are the various divisions that make components for optical networks.

Over the last few years, optical component makers, such as San Jose-based JDS Uniphase and MRV Communications Inc. of Chatsworth, have seen their stocks boom with the growth of fiber-optic networks.

The optical systems market is expected to grow 46% this year to $23.6 billion, according to Robertson Stephens.

The success of these companies has caused analysts to ask whether Lucent should spin off its microelectronics unit to unlock some value in the company’s stock.

Lucent’s microelectronics unit generated $5.4 billion in revenue last year, according to the company’s filings with the Securities and Exchange Commission.

Tracking stocks have become a popular way for companies to highlight a fast-growing unit and increase shareholder value. Lucent’s former parent, AT&T; Corp., recently raised about $9 billion by launching a tracking stock for its wireless telephone unit.

Lucent, whose first-quarter profit fell 23% as revenue remained flat, has been pitted against chief rivals Cisco Systems Inc. and Nortel Networks Corp. in a fierce battle to supply telephone companies, Internet service providers and large corporations with sophisticated equipment that can transmit increasingly large volumes of data and voice traffic.

A spinoff could prove a useful weapon in Lucent’s battle to lift its flagging stock price, which has fallen 27% since the beginning of the year.

The deal, if it materializes, would placate analysts who have been clamoring for the spinoff for years and would give Lucent investment capital to help it focus on optical systems and Internet router markets, Business Week said.

Lucent shares finished off $2.13 at $56.63 on the New York Stock Exchange on Wednesday.