Lucent Technologies Inc. reported a quarterly loss of $2.88-billion (U.S.) yesterday and a dwindling cash supply, suggesting to some observers that competitor Nortel Networks Corp. is better prepared to struggle through the telecom bust.

"Nortel looks as if it's in better shape because it'll probably have significantly more cash than Lucent next year," said Tom Lauria, an independent analyst at Avtera Management LLC in New Jersey.

Murray Hill, N.J.-based Lucent said yesterday sales for its fourth quarter ended Sept. 30 fell 56 per cent to $2.28-billion from $5.16-billion last year. The network equipment maker said sales in the October-December quarter will likely fall another 10 per cent. However, it said sales for the January to March, 2003, period should rise to $2.5-billion, though it did not credit the predicted bounce to a general industry rebound. Nortel, when it issued results last week, did not make a sales forecast.

Lucent and Nortel, two leading makers of network equipment, face many of the same issues. Sales have collapsed in the past year as phone companies severely slashed spending budgets after building too much capacity in the later 1990s. And while shares of both companies are down 99 per cent from their record highs, investors have pushed Nortel stock higher in recent days. Lucent stock remains moribund.

Stock of Brampton, Ont.-based Nortel bottomed at 43 cents on the New York Stock Exchange on Oct. 10 and has since more than doubled to 90 cents. Nortel shares closed at $1.41 (Canadian) yesterday on the Toronto Stock Exchange.

Lucent hit its nadir of 55 cents (U.S.) on Oct. 11, but has only climbed 38 per cent to 76 cents. Nortel's market capitalization stands at $3.5-billion, according to data-provider Bloomberg LP, higher than Lucent's $2.6-billion.

"We believe the recent relief in [Nortel] stock is due to investor relief on liquidity issues," UBS Warburg Inc. analyst Michael Urlocker told clients in a report this week.

Nortel said it ended September with $4.59-billion in cash on its balance sheet, down from about $4.9-billion at the end of June. The company said it will end 2003 with about $2-billion in cash, close to UBS Warburg's estimate.

Lucent's cash balance fell by $1-billion through the summer to $4.42-billion at the end of September, the company said yesterday. It estimated it will have about $2-billion at the end of September, 2003.

"We have sufficient liquidity to fund our turnaround and make it through this prolonged down cycle," Frank D'Amelio, Lucent's chief financial officer, said in a release.

Lucent said it is partly counting on rising sales of wireless equipment in the United States in the coming months. However, CIBC World Markets estimates American wireless gear sales will fall about 15 per cent in 2003, because of stiff competition among a number of wireless companies. The investment bank said Nortel is less dependent on the U.S. market than Lucent.

"If wireless sales even stutter, there's probably some major liquidity concerns at Lucent," said Steve Kamman, a CIBC World Markets analyst. "If you compare Nortel to Lucent, Nortel is in much better shape."

Beyond Nortel's seemingly stronger cash position, its business fared better during the July-September period. Lucent, excluding some costs and losses from a major customer default, reported gross margins of about 25 per cent, according to Mr. Lauria of Avtera Management. Nortel, meanwhile, reported gross margins of about 38 per cent.

Further, Nortel's wireless business appears stronger. Sales in the period ended Sept. 30 fell to $940-million, down 30 per cent from last year. Wireless accounted for 40 per cent of Nortel's sales in the period.