Agere Systems Inc., the Lucent Technologies Inc. unit whose planned initial stock sale is expected to be the second-biggest in U.S. history, may record a "significant" operating loss in its fiscal second quarter as customers cancel orders.
Agere, Lucent's fastest-growing business, said in a filing Tuesday that it expects sales to fall in its fiscal second quarter ending March 31 from its first quarter. Agere makes semiconductors for communications equipment and components used in fiber-optic networking gear.
The company's IPO comes as many customers and rivals slash sales and profit forecasts. Facing a weaker U.S. economy, telecommunications companies are spending less on the networking equipment made by Lucent and Nortel Networks Corp. The slowdown also has cut demand for lasers, chips and parts used in the gear.
"This has to be one of the worst possible times to do an IPO," said Walter Casey, an analyst with Banc One Investment Advisors Inc.
The company narrowed the offering's $15-to-$20 price range to $16-to-$19, according to the filing at the Securities and Exchange Commission.
Allentown, Pa.-based Agere will offer 222.7 million Class A shares in the IPO, set to occur by the end of March. Morgan Stanley Dean Witter & Co., the underwriter, will offer as many as 147.7 million shares.
Lucent will distribute its remaining Agere stake to shareholders by Sept. 30.
Agere said it's experiencing slack demand for its products from "a number of our large customers," which include Lucent, Nortel and Motorola Inc.
Lucent shares slid 33 cents to $12.34 on the New York Stock Exchange. They've tumbled 75% in the last year. Shares of Avaya Inc., the No. 1 U.S. maker of corporate phone equipment, have fallen 38% since the company's spinoff from Lucent on Sept. 30.
Agere's sales fell to $1.36 billion for its fiscal first quarter ended Dec. 31, from $1.49 billion for the fourth quarter ended Sept. 30, according to a filing with the SEC.
Gross profit declined to $574 million in the first fiscal quarter of 2001 from $715 million in the fourth quarter of 2000. As a result, gross profit as a percentage of revenue fell to 42.1% in the first quarter from 48% in the fourth quarter.