Lucent Technologies Inc, which has fallen from telecommunications bellwether to penny stock in less than three years, plans a reverse split of its shares to avoid being delisted from the New York Stock Exchange.
The largest US maker of telephone equipment will set a split ratio to boost the shares to US$15 to US$25, Lucent said in a statement. Lucent will seek investors' approval at its February annual meeting. The shares fell US$0.07 to US$0.68 at 4:01pm in NYSE composite trading.
"They really didn't have any choice but to do this reverse split," said Shawn Campbell, an analyst at Northern Trust Corp, which owned 13.6 million Lucent shares as of June. "It doesn't change anything about the company."
Lucent follows rival Nortel Networks Corp and former parent AT&T Corp in seeking reverse splits after their shares tumbled along with demand for phone gear and services. Lucent tallied US$26 billion in losses in the last nine quarters and has announced plans to shed 91,000 jobs since September 2000. Some investors have said the company may run out of cash by December 2003.
Yesterday, Murray Hill, New Jersey-based Lucent's average closing price for the past 30 trading days fell below US$1, violating a New York Stock Exchange listing requirement. The exchange gives a company 10 days to explain how it will increase its share price.
Last Friday, Chief Financial Officer Frank D'Amelio said Lucent might initiate a reverse split to help bolster the share price and avoid breaking the exchange's rule.
"We are not going to be delisted," he said in an interview at the time.
Reverse splits are intended to increase the stock price by reducing the number of shares outstanding. They have no impact on a company's stock-market value. Lucent had 3.43 billion shares outstanding at the end of July, according to Bloomberg data.
"You've still got to address the reason why your stock is going down," said RBC Capital Markets analyst John Wilson, who has an "underperform" rating on Lucent shares and doesn't own them. "The fundamental challenge for the company is still to get back to earnings, and can they finance themselves until that point?"
Last month, Lucent said sales would drop as much as 25 percent in the fiscal fourth quarter that ended Sept. 30, from the third period's US$2.95 billion. Last week, Lucent predicted a decline of 20 percent in fiscal 2003 sales.
Nortel breached the New York exchange's US$1 average threshold last month. The Brampton, Ontario-based phone-gear maker said it would ask shareholders to approve a reverse split at its annual meeting in early 2003.
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