Cisco's Prospects Brighten as Lucent's Light
Dims
By James J. Cramer
5/29/01 8:33 AM ET
( I hate posting mildly bullish articles, but what the hell,it's relevant ) AD
Looking for more reasons to get long Cisco
(CSCO:Nasdaq - news - boards)? Well, how about
the fact that nobody else joined in the unspirited
bidding for Lucent (LU:NYSE - news - boards)?
How about the fact that Alcatel (ALA:NYSE ADR - news - boards) is paying
no premium to buy this principal competitor of Cisco? How about how Lucent
will no longer have to virtually give property away to get sales from Cisco? How
about the idea that the wounded player will soon be gone?
To me competition is okay as long as it is healthy, but you get one player that is
desperate and it ruins things for everybody. That was the case with the airlines, for
example, for years and years and years.
There was always one hobbled carrier that was desperate to
fill seats to boost cash flow. That brought price war after price
war. Then, in the late '80s, all of the marginal carriers went
kerplooey and we had the rational pricing that gave AMR and
Southwest and a couple of other carriers some record
profits. The positive trends continue to this day because the hobbled are no longer
hobbling. They are dead.
Same could happen with telecom equipment. Who knew how bad it was at Lucent?
Why, everybody. Hence, no other buyers. But Alcatel isn't hurting. It can end the
giving away of merchandise immediately. And bring back rational pricing.
That should give a lift to this whole beleaguered sector.
Starting today. |
