Evaluate the seasonally adjusted change (i.e., quarter iin year tto quarter iin year t-1) in Lucents: Sales, Accounts Receivable, Inventory and Gross Margin for the five quarterly periods: December 1998 through December 1999. Be sure to include an evaluation of the Footnote disclosures regarding Lucents inventories in your examination. Does the explanation for the earnings shortfall provided by Lucents managers make sense in light of your analysis? Document Preview: LUCENT TECHNOLOGIES Clark M. Wheatley School of Accounting -Florida International University BA242B University Park, Miami, FL 33199 AT&T spun off its research and development division (the former Bell Laboratories) in April of 1996, and the newly independent company -renamed Lucent Technologies -was an instant hit with investors. The companys stock became the most widely held in the United States, and over the following 3 years and 9 months its price increased 892%.1Lucent Technologies manufactures, sells and services voice and data communications systems and software. By the end of its fiscal-year 1999, Lucent generated over thirty-eight billion dollars in annual revenues, employed over 150,000 people, and had offices in more than ninety countries worldwide. This remarkable price appreciation tracked a series of steadily increasing earnings that exceeded analyst expectations. Lucent, in fact, had beaten those expectations in each of its 15 quarters of operations (Zacks, 2000). On October 26, 1999, Lucent issued a press release describing record earnings for both the quarter and the fiscal year ended September 30, 1999 (Lucent, 1999a). Lucents revenues were up 23 percent, and earnings were up 50 percent from the fourth quarter of the previous year. For the fiscal year, Lucents revenues and earnings were up 20 and 46 percent respectively. Lucents chairman and CEO, Richard McGinn, described the results saying: Lucent enters the new millennium with momentum. This was the strongest quarter and the strongest year in Lucents history. The report of these record results was accompanied by another press release. This second announcement outlined a realignment of Lucent into four core businesses. This realignment was, in the words of McGinn, intended to mirror the way we are approaching customers today -with converged network solutions. We are sharpening our focus on high-growth areas -such as data networking, optical networking, wireless semiconductors, Attachments: ACG-6175-Week.pdf