Lucent announced that revenues would be adjusted downwards by $679

May 19th, 2015
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California State University - Bakersfield
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In product development it had failed to foresee the rapid switch to fibre-optic networks,enabling competitors such a Nortel Networks Inc. to capture market share. As a result, at the end of 2000 the company reported earnings declines for 2 consecutive quarters. This provided incentives for Lucent to manage its profit and recognize revenue that was not yetrealized.

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In late 2000, Lucent announced that revenues would be adjusted downwards by $679 million as a result of revenue recognition problems. Yet the firms market capitalization plummeted by $24.7billion. Why do you think the market reacted so negatively to Lucents announcement of theProblems?In product development it had failedto foresee the rapid switch tofibre-optic networks, enabling competitors such a Nortel Networks Inc. to capture market share. As a result, at the end of 2000 thecompany reported earnings declines for 2 consecutive quarters. This provided incentives for Lucent to manageits profit and recognize revenue that was notyet realized.By 2000, the technology boom had lost momentum, leading to excess capacity, increased price competition and decrease indemand for Internet networking equipment, software and services. This provided further ince

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