June 5, 2002 — Agere Systems should succeed in staking a name and claim separate from Lucent Technologies, despite a rocky road to independence and rough economic times, analysts said.
“The last ties are being severed,” said Lawrence Gasman, president of Communications Industry Researchers, referring to news this week that Lucent had completed the spinoff of optical MEMS maker Agere after many months of delays. Lucent over the weekend distributed 945 million shares of Agere common stock to nearly 5 million Lucent shareholders.
Gasman said one of the reasons for splitting the companies was the assumption that telecom carriers were reluctant to deal with Agere because it was part of a competitor and that design secrets could get passed along.
 |
He expects that Lucent, in an effort to be seen as independent, will make a high-profile purchase from another player, and Agere might lose some of Lucent’s business in the short term. But he said the pair will continue to work together, and Agere’s relatively good reputation in the industry should help it win more customers.
And it might help erase some bad memories of the recent past.
The spinoff originally was planned for last September, but Lucent’s creditors said the optical equipment maker had to post positive earnings for a full quarter before letting go of Agere, its former Microelectronics Group. Lucent, itself a spinoff from AT&T Corp., managed to meet bankers’ terms for the quarter that ended March 31, though it still reported a loss.
After several quarters of losses and layoffs, Agere reported a 2.6 percent sequential increase in revenues to $551 million for the quarter ended March 31 — the first quarter of sequential revenue growth in six quarters. Net loss for the quarter was $219 million, which included restructuring and acquisition charges.
Earnings for both firms’ stock were flat on Monday. Agere’s stock closed Tuesday’s session at $3.01 a share, a 4.75 percent drop from the previous day’s close. TheStreet.com reported that market watchers expected falling shares as index funds reacted to Agere’s exclusion from the S&P 500 index.
In March 2001, Lucent offered 600 million shares at $6 a share in Agere’s initial public offering.
The IPO and what’s happened since might have something to do with why this week’s move hasn’t been better received, said Marlene Bourne, a MEMS analyst for In-Stat/MDR. It’s hard to keep the momentum going after more than a year, she said, especially when it finally comes as it does during tough times for the firms and the industry.
“I can’t imagine, even if a company gets spun off, those fears all go away,” she said.
“When they went public, that was all the brouhaha, even though they hadn’t been spun out of Lucent. I’m wondering if the spinoff hasn’t really happened and this is a formality. … I’ve considered them separate since the IPO.”
Still, she said, it should be good for Agere to get out from under Lucent’s shadow as it develops new products and customers.
Agere said in March it started volume production of the S5200 three-dimensional switch, and expects to complete its qualification process by summer’s end. The firm said it is the first to make a 3-D switch — so named because of its three-dimensional array of mirrors that reflect light in multiple directions — and deliver it to market.
JoAnna Schooler, an Agere spokeswoman, said the two firms already have been operating day-to-day as separate firms. But this week’s declared independence should help dispel market concerns.
“It’s really the start of a new phase for us,” she said. “What I think it does, overall, is now free us from any remaining strategic conflicts that were there when we were part of a larger telecom equipment company.
“Now we’ll be able to serve our customers and really deepen our relationship with them.”