Lucent has lost a body-blowing $29 billion since 1999, but the company is finally stemming the spew. In its most recent quarter, it lost a relatively absorbable $389 million. By the end of its fiscal year in September, it expects to post a profit.
Holy mackerel. Did we just utter the word "profit"? We did. But Lucent won't be out of the frying pan yet. Although the company expects to hold $2 billion in cash by fiscal year-end, it has $3.2 billion in long-term debt -- $1 billion of which could be due in August 2004 if bank credit isn't extended.
That, in addition to declining sales, thinned ranks, and Russo's expectation for only 5% to 7% long-term growth in telecom, makes for a long upward haul ahead. To help prepare for the slow recovery, the company is considering a reverse stock split.
The New York Stock Exchange can delist a stock if it doesn't average above $1 a share in price over a 30-day period. A reverse stock split would put the share price around $15 to $25 by decreasing the number of shares outstanding.
Reverse stock splits alone will never save a company. Lucent needs to start earning enough profits to pay down its debt, reinvest in R&D and sales, and fund its underfunded pension fund. In other words, there's still a lot stacked against the company.