We are looking at fiscal year 2001 as a transition and rebuilding year for Lucent

Henry Schacht, Lucent

After the US stock markets closed, it reported fourth-quarter profits down 22% as sales of telephone switching equipment and optical networking systems fell.

Moody's Investors Service said it would be reviewing Lucent's ratings, with the possibility of a downgrade.

Lucent has been struggling to recover from product development problems.

Down but not out

Although profits were down, they were still some $600m, or 18 cents a share.

A year earlier, they had stood at $768m, or 24 cents a share.

Revenues for the fourth-quarter (ended 30 June) rose 14.6% to $9.4bn, up from $8.2bn.

Earlier in the day, Lucent had issued a warning about its next set of figures, for the first quarter of the current financial year, cutting back its sales and profits outlook.

It also announced that it had replaced chairman and chief executive Richard McGinn with former chairman Henry Schacht.

Lucent's future

Mr Schacht stressed his confidence that he would be able to turn round the company, whose position in the industry has been threatened by rivals such as Nortel Networks.

"Our issues are ones of execution and focus, and they are fixable... I have seen Lucent's people accomplish incredible feats before, and I know we are up to this challenge," Mr Schacht said.

The company says it expects revenues to fall about 7% in the first quarter, although it says performance will pick up after that.

Many analysts pinpoint the company's slowness in moving from traditional telephone switch networks to high-speed fibre optic networks as a reason for the slowdown in profits.

When Lucent launched its own optical product line, it was unable to keep up with customer demand, thus losing orders to its rivals.

The company will hope that its decision to replace Mr McGinn will appease critics who have been looking for a shake-up of its management structure.