The following is an excerpt from Lucent Technologies’ Management’s Discussion and Analysis of Financial Condition and Results
of Operations: Executive Summary We design and deliver the systems, software and services that drive next-generation communications networks. Backed by Bell Labs research and development, we use our strengths in mobility, optical, access, data and voice networking technologies, as well as
services, to create new revenue-generating opportunities for our customers, while enabling them to quickly deploy and better
manage their networks. Our customer base includes communications service providers, governments and enterprises worldwide.
We have three segments organized around the products and services we sell. The reportable segments are Integrated Network
Solutions (“INS”), Mobility Solutions (“Mobility”) and Lucent Worldwide Services (“Services”). INS provides a broad range of software and wireline equipment related to voice networking (primarily consisting
of switching products, which we sometimes refer to as convergence solutions, and voice messaging products), data and network
management (primarily consisting of access and related data networking equipment and operating support software) and optical
networking. Mobility provides software and wireless equipment to support radio access and core networks. Services provides deployment, maintenance, professional and managed
services in support of both our product offerings as well as multi-vendor networks. Beginning in fiscal 2001, the global telecommunications market deteriorated, resulting from a decrease in the competitive
local exchange carrier market and a significant reduction in capital spending by established service providers.This trend intensified
during fiscal 2002 and continued into fiscal 2003. Reasons for the market deterioration included general economic slowdown, network
overcapacity, customer bankruptcies, network build-out delays and limited availability of capital. We believe that the market for telecommunications equipment has stabilized and is starting to grow in certain areas. The growing demands of enterprises and consumers
for additional services tailored to their needs is creating the need for a new convergence of networks, technologies and applications.
1. Using the Consolidated Balance Sheets for Lucent Technologies for
September 30, 2004 and 2003, prepare a common-size balance sheet.
2. Evaluate the asset, debt, and equity structure of Lucent Technologies, as well as trends and changes found on the common-size balance sheet.
3. What concerns would investors and creditors have based on only this information?
4. What additional financial and nonfinancial information would investors and creditors need to make investing and lending decisions for Lucent Technologies?
C A S E S
Case 2.1 Lucent Technologies