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7/20/1999
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Buoyed By Strong Networking Demand, Lucent Reports Healthy Q3

Networking giant Lucent Technologies today reported third quarter net income that beat analysts' expectations, as telecommunications companies around the world continued to invest heavily in Lucent's equipment.

Murray Hill, New Jersey-based Lucent said that its net income increased 60% to $829 million, or 26 cents a share for the third fiscal quarter ended June 30, excluding one-time merger-related costs. The mean analyst estimate was 23 cents per share. Net income for the year-ago quarter, excluding one-time charges, was $518 million or 17 cents a share. Revenues for the quarter increased 22% to $9.3 billion, from $7.64 billion a year ago. "Carriers around the world are investing in next-generation networks at an unprecedented pace," said Richard McGinn, Lucent Technologies chairman and chief executive officer.

Lucent's results came one day after the company lost senior executive Carly Fiorina, who resigned to become president and chief executive of Hewlett-Packard Co. Fiorina becomes the first outsider to run Hewlett-Packard and the first woman to head one of the nation's 20 largest companies. Lucent recently completed its $24 billion merger with rival networking equipment maker Ascend Communications. Since the beginning of the fiscal year, Lucent has announced nearly $9 billion in new business, including major broadband wins in June and July with Level 3 Communications, Telefonica, Telstra and, earlier today, with Frontier Communications.

Lucent's growth this quarter was again strong with both established and emerging service providers and across geographic regions. The company's microelectronics business also was a key growth driver in the quarter.

Sales of systems for network operators rose by 27% over the year-ago quarter to $6 billion, driven by sales of wireless systems, data networking systems for service providers, optical networking systems, 5ESS switching systems, communications software, and services.

Sales of business communications systems rose 4% from the year-ago quarter to $2.1 billion, led by sales of the company's Definity Enterprise communications server to large businesses. Microelectronic product revenues increased 23% over the year-ago quarter to $902 million.

As a percentage of revenue, gross margin for the quarter improved to 48.1% from 46.5% in the year-ago period, reflecting a more favorable mix of products.

Lucent's stock was down 6 1/4 to 70 9/16 in late afternoon trading, part of a sharp, across-the-board decline in technology stock prices today.

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