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Technology Stocks : Lucent Technologies (LU)

LU 2.820

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Nov 7 9:30 AM EST

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To: puborectalis who wrote (8156)	6/16/1999 11:58:00 PM
From: A. Edwards	Read Replies (1) of 21876

Update on the cable equipment industry: Merrill Lynch Michael E. Ching Timothy P. Long June 16, 1999 Motorola and Lucent Technologies announced that they would jointly develop a new cable telephony over IP platform. We view this as an important strategic move for the following reasons: 1. The cable telephony market is expected to grow dramatically over the next several years; we could see the equipment market reaching several billions of dollars in the next few years. Most existing solutions are based on circuit switched technology, but both Motorola and Lucent are betting that customers will soon want a cable telephony product that is based on the Internet Protocol (IP). This joint development positions Motorola and Lucent to establish an early leadership position for the next generation cable over IP solution, and AT&T is an obvious target customer. 2. For Motorola, this agreement gives the company access to key IP telephony technology, and allows the company to potentially build upon its early success in cable products. The company has shipped over 200,000 cable telephony ports and 600,000 cable modems, but has lacked an end-to-end solution that could take this business to the next level. We estimate that revenues were about $50 million in 1998. We believe that the company's goal is to achieve $1 billion in annual revenues within five years. 3. For Lucent, the company gains access to market leading cable modem technology that it was lacking. This agreement also is important because it gives Lucent a more complete line of products being requested by one of its largest customers, AT&T. 4. We believe this agreement could accelerate the development of cable telephony over IP. The new system will support CLASS features and improved quality of service.

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