Lucent settles shareholder suits, sees charge

SAN FRANCISCO: Lucent Technologies Inc. agreed to settle all of the outstanding shareholder lawsuits against it for an amount that plaintiffs' lawyers said would top $600 million.

Lucent said it expected to take a second-quarter charge of about $420 million, or 11 cents a share, related to the settlement of 54 lawsuits, which requires final court approval.

Lucent and other telecom equipment makers experienced a severe downturn as their phone company customers slashed investments over the past two years due to overcapacity that resulted from over-investment during the Internet bubble.

Lucent posted a $12 billion loss in fiscal 2002, and has sold non-core assets, eliminated money-losing products and slashed about two-thirds of its work force.

Milberg Weiss Bershad Hynes & Lerach LLP, co-lead counsel on the lead case in the lawsuit, filed the class-action lawsuit in 2000 on behalf of lead plaintiffs Teamsters Locals 175 and 505 of West Virginia.

The complaint charged that Lucent, in an effort to conceal from investors that it was having serious undisclosed problems in its optical networking business, misrepresented demand for those products and engaged in improper accounting.

PHONY SALES ALLEGED

Those practices led to artificially inflated reported financial results by Lucent, including booking hundreds of millions of dollars in phony sales, the lawsuit alleged.

Under the agreement, Lucent said it would pay $315 million in common stock, cash, or both, issue 200 million warrants to purchase an equal number of shares of common stock at a strike price of $2.75 with a three-year expiration from issuance that the company valued at about $100 million.

Lucent said it would seek partial recovery of the $315 million from its insurance carriers under certain policies that are worth up to $70 million. Lucent's insurance carriers have agreed to pay $148 million in cash to the settlement fund, and Lucent will pay up to $5 million for the cost of administering the settlement.

That brings the total amount of the settlement, excluding an amount yet to be determined from Lucent spin-off Avaya Inc. to nearly $570 million. David Bershad, a senior partner at Milberg Weiss who negotiated the agreement, estimated the Avaya portion of the settlement would be $30 million to $40 million.

"We also think the warrants are worth considerably more than $100 million," Bershad told Reuters, adding that the final amount of the settlement will likely be closer to $700 million.

"By resolving these legacy issues, we can put all of our energy into running the business and continuing to rebuild shareowner confidence in the performance of this company," Patricia Russo, chairman and chief executive of Lucent said in a statement. At the end of December, Lucent had $3.7 billion in cash and short-term investments.

Lucent, based in Murray Hill, New Jersey, said that the settlement covers all pending shareholder and related litigation against the company, its current and former officers and directors, and certain other defendants.

© Reuters