Some random info to help:
1) SBC: $3B or so of the $6b (over 3 years) will be for actual xDSL cards. Alcatel has won the primary source contract, in no small part because of DSC's dominant position as a supplier of DLCs at SBC. There will be a second source contract - a source says 3 companies are in the running, of which one is LU. Other parts of the contract will be additional DLCs (likely ALA), and fiber (more or less commodity - no metro DWDM). About $1.5B will be trunking - LU and NT ATM will be trialed, as per Network World (unclear about NN status, the guy I talked to didn't know). Telephony software will be a big piece of the $1.5B - LU's SoftSwitch and NT's Succession Call Server will be trialed for VTOA eventually to migrate to VoIP. This is directly from SBC.
2) There are about 50M shares short going into the quarter and the hedge fund managers are pushing the doomsday scenario. Don't pooh pooh the idea that the shorts are driving the stock - Not individual investors, but hedgefunds with big short positions. Good news is if LU hits $10B in revs, $0.30 in EPS, 87 DSO receivables and sequential inventory improvement with guidance unchanged for Q1 and FY00, the shorts will be forced to cover, and the stock will get a huge boost.
3) The rumors out there now are just crazy talk. The most prevalent one today said LU was factoring receivables by selling them to their pension plan. First of all, carrier customers would never, never accept having their receivables sold to a 3rd party - say bye bye to future sales. Second, these receivables are not bad debt, so selling them for a discount is just bad business. Third, even if LU could factor its receivables, pension plans can't make those kinds of investments. Fourth, LU's pensions are managed by an independent board that would never enter into a questionable transaction for the real risk of being sued. Yet, this story was a real factor in Lu's PM drop.
4) The sell siders supporting the stock and the quarter - Alex Cena, Greg Geiling, Nikos Theodosopolous, Paul Sagawa, Jim Parmalee - are all ranked or runner up in the just released II all-star poll. The guys with the best contacts and perspectives are all pounding the table now. IMHO Unlikely that they are all wrong, particularly when my own research completely supports their conclusions.
5) Accusations of fast and loose accounting are libelous. This all streams from the blasts levied at Tyco. Lucent has non-cash benefits stemming from its overfunded pension plan - a legacy of ATT days. Since the big reassessment in Jan, it generates and will generate 2 cents of benefit every quarter. This is absolutely transparent to anyone who participates in the quarterly call or reads the 10Q. In an apples to apples comparison - Cash EPS grew 44% YoY in FY98 and is expected to top 40% for FY99 based on consensus. Do the work before you repeat this garbage.
6) The balance sheet also is receiving continued scrutiny. There is no new news here - find my exchanges w/ chuzzlewit for detail. In any case, the company has put its credibility on the line for 5-10 days improvement in DSOs and sequential improvements in inventory. I heard that LU was on track to meet these targets from the CFOs mouth the day before quiet period began, three weeks from the end of the quarter.
7) Earnings will be released on the 26th because McGinn is tied up in the year end board meeting this week. It is very important that he take charge of the earnings release to avoid a repeat of last quarter, where Peterson and Stanzione fumbled the ball on the call after reporting a superb quarter.
8) Don't panic. |
