Case | HBS Case Collection | August 2006 (Revised August 2007)

Revenue Recognition Problems in the Communications Equipment Industry

by Paul M. Healy and Arjuna J Costa

Abstract

Designed to explore recognition issues in the context of a potential market downturn. In late 2000, Lucent Technologies reports multiple revisions to its recent financial results due to revenue recognition problems, leading to a dramatic decline in its stock price. This disclosure comes in the wake of a period of spectacular growth for the communications equipment industry during the 1990s. From the perspective of a securities analyst covering the industry, are the troubles at Lucent indicative of larger revenue recognition issues throughout the industry? Facilitates a discussion of potential early warning signs of the risks faced by Lucent's competitors.

Keywords: Corporate Disclosure; Revenue Recognition; Policy; Supply and Industry; Performance; Communications Industry;

Citation:

Healy, Paul M., and Arjuna J Costa. "Revenue Recognition Problems in the Communications Equipment Industry." Harvard Business School Case 107-025, August 2006. (Revised August 2007.)