SEC to review Lucent accounting practices

Friday, the Securities and Exchange Commission announced it would formally investigate Lucent Technologies' accounting books for irregularities on how it records revenues. On its own accord, Lucent notified the SEC of these discrepancies and revised its 2000 revenue down in November by approximately $680 million. \nThe SEC decided to formally investigate this matter -- but might also force Lucent to revise historical records from years ago and change the way it books future revenues, according to The Washington Post. \nAbout $450 million of the revised revenue was from recording sales when the product was shipped to distributors, not the customer -- a practice commonly called "stuffing the channels". The rest of the revision was because of credits offered to customers who returned the equipment and from partial shipments.\nTrying to downplay the gravity of the investigation, Lucent said in a press release, "This is not new news. We were quite clear in our November and December announcements that we were sharing information with the SEC, and that is what we have done."\nSome analysts following the company say they believe the formalization of the investigation does signal things could get worse. At one extreme, some on Wall Street are beginning to question Lucent's future. \n"It makes me wonder about how long Lucent can survive in its current form," Tom Lauria of ING Barings told The New York Times.\nOthers believe this could be the last of Lucent's woes. Michael Ching, an analyst with Merrill Lynch, told CNBC.com "This may be a formality to finalize the restatements already made by (Lucent), and could close the chapter in their history."\nChing said if the SEC forces Lucent to change how it books revenue in the future, Lucent's troubles would continue.\nMajor shareholders charge that Lucent defrauded them through misstatements in its earnings. A former sales executive is suing because she was forced into retirement by top management for arguing that Lucent's sales projections were unrealistic, according to The Washington Post.\nLucent repeatedly lowered earnings last year, revised down its 2001 projections and will take a $1.2 billion charge to earnings this quarter. It also ousted its CEO and has seen major attrition from its executive ranks over the past year.