Lucent Technology's creditworthiness is in danger of collapse, according to US rating agency Standard & Poor's (S&P).

The discounted flotation of microelectronic arm Agere has caused Lucent's market valuation to sink so low that it is close to being relegated to junk bond status.

Junk bond stocks are high-risk ventures with low credit ratings, which could cause the company significant problems when trying to borrow money in the future. The Agere sale was expected to generate $5bn, but achieved only half that amount.

"Lucent has less cash than it hoped, and we don't know how much progress has been made on its restructuring," said Bruce Hyatt, a telecoms analyst at S&P. "There are two ways to reverse this situation: Lucent sells its fibre optic cable division, or someone buys Lucent."

Rival Nortel Networks has posted a profit warning ahead of its first-quarter results. Plans to float Nortel's component division have been delayed until the end of the year as a result of Agere's poor performance.

"Nortel has learned from Lucent's misfortune. Everyone has," said Susan Harkar, principal analyst at The Yankee Group.

Nortel, which will shed 15,000 jobs by this summer, said that increased losses were likely for the first quarter, with revenues decreasing to $6.3bn.

A spokesman added that the downturn in the market meant it will be difficult to predict how well Nortel will do this year.

"It will be another year to 18 months before market conditions improve. It has to survive that," said Harkar.

Also published in Computing