Word: lucent
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Consider John Ellis, 45, who worked at AT&T and then at its spin-off Lucent for a total of 24 years. He left Lucent before the telecom equipment maker's recent string of bad news. But his 401(k) was always fully invested in Lucent stock, and a year ago, it was worth $500,000. A brutal 75% slide in Lucent's price in the past 12 months chopped his balance to $130,000. Sadly, Ellis' plight isn't unusual, nor is this solely a tech experience...
Employees at struggling big-name companies such as Gillette, Lucent and Campbell Soup have suffered some horrific losses in their 401(k) plans in the past few years. Dozens more plans of similar pedigree could implode at any time. Why? Too many companies have loaded their plans with too much of their own stock, leaving employees dangerously concentrated in a single security. Are you one of them...
...Then there were the discounts - offering some of its biggest customers deep discounts to make purchases they might otherwise have postponed until a later quarter. This would help Lucent boost its revenue numbers in the quarter when they needed a boost; problem was, Lucent's business continue to sag, at which the discounts came back to haunt them...
...Which all led in part to December's $679 million "revenue recognition" mea culpa, in which Lucent essentially had to face the music for on-credit purchases that fell through. It was the latest in the string of earnings embarrassments for the company (though not the last - in January, Lucent reported that first-quarter sales were down 28 percent and announced a $1.6 billion restructuring charge...
...Lucent spokeswoman Kathleen Fitzgerald told the Journal it was "voluntarily and completely cooperating with the SEC" since it was first contacted in November, and has shared not only all of its findings on revenue restatements with the commission but also the results of an external audit. Company lawyers have also been regular visitors to SEC headquarters in Washington...