Gary, Here is an interesting article, especially since you are such a huge gilder fan <g>.
investorplace.com
Grab Lucent on the Rebound
By John P. Dessauer
Editor, Investor's World
February 11, 2000
Technology giant Lucent Technologies (NYSE: LU) has crashed to earth with recent earnings shortfall announcements. This is your chance to buy the stock, before it goes to $80 and beyond. Here's why:
Born four years ago, after the government forced AT&T to split up, Lucent is the evolutionary child of Bell Labs, probably the best technology facility ever created. Lucent has carried on the tradition of excellence and innovation in technology and has created a profitable business enterprise.
George Gilder, the leading futuristic thinker on technology and how it will change the economic landscape, is impressed with Lucent's giant fiber optic manufacturing facility in Georgia. In that facility, he saw that Lucent's ALLWave fiber solves technical challenges and allows a quantum increase in transmissions per fiber. Fiber optic is the future. It allows high speed, long distance communication as never before. Fiber optics and the related equipment alone are a good reason to own Lucent now.
But there is a lot more to Lucent than fiber optics. Lucent designs, develops and manufactures a wide array of communications systems, both wireless and wired. We have a Lucent phone system in my office. It is a marvel of technology that integrates e-mail, voice mail and remote access. Imagine the systems Lucent provides to bigger businesses and governments. I know you hate calling a business and hearing that automated voice, but this is Lucent technology at work, and it allows you to communicate around the clock. I believe new technology allows people to be more efficient and effective.
On December 9, 1999, Lucent's stock was flying high, above $84, at a new record high. Shortly thereafter, management told Wall Street that the quarter was not looking as good as expected. The stock came tumbling down. On January 21, after the market closed, Lucent issued the worst news. Earnings for the first quarter of the new fiscal year were $0.36 a share, a penny below the low end of the revised range and far below the $0.48 earned in the 1998 quarter.
For the first time in 15 quarters, Lucent stumbled. The disappointing results were the result of a combination of factors--changes in Saudi Arabia, a major client of Lucent, inability to meet strong demand for new products, and unnecessary expenses. Wall Street really doesn't like the fact that senior sales executives did not issue warnings earlier about a sales shortfall of more than $1 billion in Service Provider Networks.
Wall Street is right to be critical. It looks like some senior Lucent people became a little too sure of themselves and temporarily dropped the ball. But this is not uncommon in business. The same thing happened at Ericsson a year ago. Ericsson then made changes and got back on the growth track. This jolt can do the same for Lucent. It probably will take a couple of quarters before all the issues are addressed and earnings grow again. Meanwhile we have a window of opportunity to buy Lucent at a reasonable price. Not that the stock is cheap. Revised earnings for the fiscal year ending in September are $1.37 a share rising to $1.75 next year.
However, if George Gilder is right, and he hasn't missed a major paradigm shift yet, Lucent will be a star among technology companies for a long time to come. Gilder says that in the new economy, communications capacity replaces computer power as the driving force of technological advance. That's where Lucent and especially its fiber optics come into play. My advice is to take advantage of the stock's current decline and buy some shares now, and save some cash to buy more Lucent if it should dip below $50 first.
Top global investment advisor John Dessauer's investing system has earned more than 1,039% gains over the last 18 years. Visit Investor's World for more information about his award-winning advisory service. |
