February 28, 2001, 9:14 AM — LUCENT TECHNOLOGIES IS having trouble securing a $6.5 billion line of credit to put the company on a more stable footing, according to an article published Friday.
The telecommunications equipment provider is seeking a $4.5 billion 364-day credit facility and an amendment to an existing $2 billion five-year revolving credit facility that matures in 2003, said Michelle Davidson, a company spokeswoman. Lenders are concerned, however, about Lucent's finances after it posted a $1.02 billion loss for the first quarter 2001, according to a story on The Wall Street Journal Friday.
Lucent had little comment on the Journal story, saying only that the company is moving forward with negotiations with lenders and that those negotiations are expected to conclude Feb. 22, Davidson said. Gaining the $6.5 billion line of credit is part of a seven-point restructuring plan announced in January to reduce company costs by $2 billion annually and increase Lucent's working capital by $2 billion, she said.
According to an analyst quoted in the Journal story, Lucent also is considering the sale of some assets, possibly its fiber-cable unit. Davidson said Lucent had no comment about this assertion. As of Dec. 31, 2000, Lucent had $3.8 billion in cash or cash equivalents, according to its balance sheet.
Lucent's apparent financing problem drew mixed reactions from analysts. Financing trouble could potentially slow the pace of Lucent's development of its 40Gbps DWDM (Dense Wave Division Multiplex) optical technology that is expected to hit the streets in 2002 and 2003, said Chris Nicoll, a vice president at Current Analysis, in Sterling, Va. It is four times faster than existing technology used over fiber optic backbones and is crucial for Lucent to get the technology to market on time because it was beat to the punch on the current 10Gbps technology by Nortel Networks and Ciena.
The outlook for Lucent overall is still positive, another analyst said.
"Lucent for the most part, as far as financials, is still healthy, and from the technology standpoint with the actions they have taken recently they should be back on track in the next 12 to 18 months," said Jay Patel, a senior analyst for digital communications at Yankee Group.
Lucent, in the past year, has had an attractive technology portfolio, but could not meet the market's demand, Patel said. This was particularly evident with the 10Gbps optical technology where Nortel Networks ate into Lucent's market share, he said. Lucent sought to grow its overall business at a faster rate than it could sustain in an attempt to meet quarterly earnings goals, company executives have said.