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Technology Stocks : Lucent Technologies (LU)
LU 2.625+2.9%Dec 5 9:30 AM EST
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To: tajen who wrote (9984)10/13/1999 10:15:00 PM
From: Maverick   of 21876
 
ML sets target $83 for LU;Concerns over RAC overdone
10/8/99 Report, curr price $65 3/16
Highlights:
ú A supplier of components for Lucent/Ascend?s
remote access concentrator (RAC) products
recently announced an earnings shortfall. We
do not believe that this is a significant issue for
Lucent shareholders because of the following
reasons.
1. The RAC business is still relatively small, and
currently represents about 2% of Lucent?s
total revenues.
2. In our last data networking market share
report, we indicated that Lucent?s RAC
business increased by 37% in the June
quarter. However, our analysis also indicated
that Lucent?s share of this market had
decreased from 33% to 23% in last years June
quarter. We believe that this primarily reflects
an increased focus from competitors,
especially Cisco, in DSL and cable modem
RAC products, an area where Lucent/Ascend
is currently weak. Lucent has announced
several new initiatives in this area.
3. We believe Lucent is increasing its focus on
managing its balance sheet. The inventory
reductions are not a surprise because other
suppliers have experienced similar inventory
reductions by Lucent.

Lucent will report September quarter
earnings on October 26. We expect revenues
to increase by 20% to $10.3 billion with EPS
of $0.28 versus $0.21.
ú Our 12-18 month price of $83 is based on 50x
our Cal. 2000E EPS
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