REV: AUGUST 23, 2007
Revenue-Recognition Problems in the Communications Equipment Industry
On November 21, 2000, Lucent Technologies announced that it was revising its fourth-quarter results as a result of revenue-recognition problems discovered by its auditors during the year-end financial review. The revision lowered revenues by $125 million and earnings per share by 2 cents from 18 cents. In response, Lucent’s stock price fell by 16%, to $17.56. One month later, on December 22, Lucent announced that after a more comprehensive review, revenues for the fourth quarter would need to be adjusted downward by $679 million, to $8.7 billion, and that earnings per share would be revised from the initially predicted 18 …show more content…
1 Shawn Young, “Lucent Revises Its Revenues Downward—Total of $679 Million Is Cut For Fiscal 4 Quarter; 1 -Period Loss Is Seen,” Wall Street Journal, December 22, 2000. th st
2 Source of information on reasons for restatements: Ibid. 3 Michael Ching, Lengthening List of Questions: Lowering Long-Term Rating, Merrill Lynch, November 21, 2000.