Lucent sold on rumour

Rumours suggested Lucent was going bankrupt

By BBC News Online's North America business reporter, David Schepp

Rumours of bankruptcy sent shares of telecom-equipment-maker Lucent Technologies spiralling on Wednesday, pushing them to a new 52-week low in New York.

The rumours began in Europe on internet message boards, prior the stock market open on Wall Street, speculating that a large telecommunications company was preparing to file for bankruptcy.

Company officials responded by calling the rumours "absolutely false".

Hopkins said Lucent has the lines of credit to turn the company around.

"They are ridiculous," Lucent spokesman Bill Price said, "We have the financial flexibility to execute our turnaround and nothing has changed in that regard."

Some investors believe Lucent's $6.5bn debt is sufficiently large to weigh the company down and force it to file for bankruptcy protection.

The company said its restructuring program is producing positive results and said it would detail its most recent quarterly results later this month.

"Let me be very clear, our $6.5bn lines of credit provide the financial resources and the financial flexibility to execute our turnaround plan," said Lucent Chief Financial Officer Deborah Hopkins.

Selling short

While admitting the company has problems, analysts for the most part do not think that Lucent is barrelling toward bankruptcy.

"They have to go through a fairly lengthy restructuring, which is clearly impacting the valuation, combined with the environment of carriers not spending," said Ted Moreau, an analyst with Robert W Baird in Milwaukee.

Traders sold off Lucent stock on rumours.

Lucent has been hurt by manufacturing woes, management turnover and intense competition in a slowing economy. In January it laid out a $1.6bn restructuring plan after reporting a loss of $1bn for its first quarter.

Some on Wall Street suggested the bankruptcy rumours were started by investors who were "shorting" Lucent stock. Shorting is a complicated stock-trading strategy that allows an investor to profit if a company's share should drop in value.

Last month, New Jersey-based Lucent was forced to cut the initial-offering price of stock for its communications chip-maker Agere Systems amid a downturn in technology stocks and waning investor interest.