ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, April 5, 1996 TAG: 9604050092
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: NEW YORK
SOURCE: Associated Press
A large chunk of AT&T broke off Thursday, becoming Lucent Technologies Inc. and setting off an investor stampede for a stake in the biggest initial public offering of a U.S. company.
Investors pushed Lucent's value up 13 percent, proof not only of interest in the growing communications equipment industry but a strong stock market.
Lucent's 112 million shares were initially priced at $27 each, making the total offering worth $3.02 billion. Lucent's stock reached $32 in the morning but drifted lower through the day to close at $30.621/2. It was the most active issue on the New York Stock Exchange. AT&T stock closed down $1.25 to $62.871/2, also on NYSE.
``It's very impressive that a deal of this size could take place without really hurting the rest of the market for new stocks,'' said Ryan Jacob, director of research at IPO Value Monitor. ``It's a testament to how strong the market is right now.''
The previous largest IPO was Allstate Corp., the insurance company spun off from Sears, Roebuck & Co. in a $2.1 billion stock offering three years ago.
Lucent accounted for $21.4 billion of AT&T Corp.'s $79.6 billion in revenue last year. It emerges as one of the nation's 50 largest industrial companies and the second-largest communications manufacturer after Motorola Inc. It also is the dominant manufacturer of telephones and network switches in the United States.
The break is the first of two to occur this year at AT&T. The company plans to also spin off its $8 billion computer manufacturing business, NCR Corp.
AT&T has said it would cut 40,000 jobs during the breakup. About 22,000 of those are in Lucent's operations, which also include computer chip manufacturing and the illustrious Bell Laboratories.
The company's underwriters, led by Morgan Stanley and Goldman Sachs, had not been expected to take it public until next week. But interest in the stock was heavy with institutional buyers lined up four to five deep for each share.
Just over half of Lucent's revenue comes from selling telephone network switches and about one-fourth is equipment used by companies for internal phone systems.
Freed from AT&T, Lucent will be able to do business with competitors of AT&T's long distance and wireless services. It has already made an arrangement with Sprint, the No. 3 long distance company, to provide equipment for its wireless business.
``Switching is really what this company is about and now that they're being pried away from AT&T, they can start selling switches to AT&T's competitors,'' said William Smith, analyst at Renaissance Capital, a money management research firm in Greenwich, Conn.
In its prospectus, Lucent said it expects to lose $100 million during the first six months of the year, including $60 million in charges related to the spinoff. If Lucent had been independent a year ago, it would have shown a loss of $22 million in the first quarter and a profit of $159 million in the second quarter.
LENGTH: Medium: 61 linesby CNB