Lucent Technologies Harvard Case

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Maria Lucia Rodriguez
PANTHER ID 3579558
Lucent Technologies Case

1- ROE decomposition 1998,1999 AND 2000. What factors contributed to the differences in Lucent’s performance between those quarters? ROE
Period
NET INCOME
X SALES
X TOTAL ASSETS
SALES
TOTAL ASSETS
COMMON EQUITY
EQUITY MULTIPLIER
ROE
Dec-99
1175
0.12
9905
0.26
38684
2.41
9905
38684
16079
Sep-99
972
0.09
10575
0.27
38735
2.84
10575
38735
13622
Jun-99
829
0.09
9315
0.25
37156
3.00
9315
37156
12403
Mar-99
457
0.06
8220
0.25
32840
3.63
8220
32840
9051
Dec-99
1523
0.15
9842
0.31
31641
3.75
9842
31641
8437
Sep-98
647
0.08
8574
0.32
26720
4.83
8574
26720
5534
Jun-98
518
0.07
7642
0.30
25279
5.14
7642
25279
4922
Mar-98
186
0.03
6184
0.25
24664
4.90
6184
24664
5036
Dec-97
1124
0.13
8724
0.35
24752
5.30
8724
24752
4671
Sep-97
369
0.05
6933
0.29
23811
7.03
6933
23811
3387
5.05%
18.05%
11.69%
PROFIT MARGIN
TOTAL ASSET TURN OVER
7.31%
7.14%
6.68%
10.52%
3.69%
24.06%
10.89%
ROE
Period
NET INCOME
X SALES
X TOTAL ASSETS
SALES
TOTAL ASSETS
COMMON EQUITY
EQUITY MULTIPLIER
ROE
Dec-99
1175
0.12
9905
0.26
38684
2.41
9905
38684
16079
Sep-99
972
0.09
10575
0.27
38735
2.84
10575
38735
13622
Jun-99
829
0.09
9315
0.25
37156
3.00
9315
37156
12403
Mar-99
457
0.06
8220
0.25
32840
3.63
8220
32840
9051
Dec-99
1523
0.15
9842
0.31
31641
3.75
9842
31641
8437
Sep-98
647
0.08
8574
0.32
26720
4.83
8574
26720
5534
Jun-98
518
0.07
7642
0.30
25279
5.14
7642
25279
4922
Mar-98
186
0.03
6184
0.25
24664
4.90
6184
24664
5036
Dec-97
1124
0.13
8724
0.35
24752
5.30
8724
24752
4671
Sep-97
369
0.05
6933
0.29
23811
7.03
6933
23811
3387
5.05%
18.05%
11.69%
PROFIT MARGIN
TOTAL ASSET TURN OVER
7.31%
7.14%
6.68%
10.52%
3.69%
24.06%
10.89%

ROE shoe a decrease over different periods due to these factors: Sales increased and therefore net income also increased and is showing an upward tendency over the quarters, also the profit margin has an increased tendency. Total assets turn over shows a decrease because of the variations in sales and increased in total assets. Another factor is the equity multiplier, this ratio also decreased because of an increase on total assets and common equity. 2- Evaluate the seasonally adjusted change

Seasonality| S1 (Dec)| S2 (Mar)| S3 (Jun)| S4 (Sep)|
Sales| 9283| 7202| 8478.5| 9574.5|
Accounts Receivables| 7740| 7164| 7639| 8688.5|
Inventory| 3191| 3603| 4076| 4064.5|
Gross Margin| 4708.5| 3320.5| 4018| 4500|

We can say that there is a seasonality pattern. When comparing the ratios we can see that sales, accounts receivables and gross margin had a better performance on S1 and S4. When we analyze the inventory, we can say that has been increasing over the periods. 3- Based on your analysis:

Based on this analysis we can say that the company is unable to maintain its record of earnings, because of sales and cost of sales upward tendency over the different periods. This company would probably recover for the second quarter.
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