The real problem in Q1 was NOT optical - yes, there was a messy product introduction, but that cost only $300M. The real problem was that LU misforecast the impact of a major change in sales force compensation and continuing changes in seasonality. In the history of LU as an independent company, December quarters have averaged only 7% YoY sales growth, while September quarters have clocked in at more than 23%. This disparity has been widening - a phenomenon I believe is related to a comprehensive change to sales force compensation in mid 1998, which shifted the quota year from calendar to fiscal.
TG, I hope that you will admit that you were surprised that LU could rebound from a quarter of "misexecution" with YoY sales growth of 26% in the core business vs. a very tough compare from the year before. Optical equipment growth was over 60%, wireless growth was more than 50%, Carrier data equipment growth was more than 80%, Opto components growth was more than 80%, semiconductor growth was more than 30%, optical fiber growth was more than 70%, professional services growth was more than 35%. These product categories account for more than 60% of total revenues.
Talk to some of these large customers you talk about. I do regularly. They believe LU has good products across the board and will be spending alot of money to buy them this year. Not that NT doesn't also have strong products, but then again the price tag for NT shares is double LU. Do you really think NT deserves multiple expansion from 80 times 2000? |
