Mr. Hunt.
Thank you for your post in re: conference call Q & A.
In particular, I liked the response to this one:
Q: What is Lucent's growth rate in China. Who are the players? How much total [business restructuring] reserve is left and when does expect other reversal decisions?
A: Lucent doesn't give specifics per region. The contracts Lucent has announced clearly signal its transition from vendor role to that of strategic supplier. The business in China is profitable. Local suppliers are becoming more important, but Lucent's main strength is the intellectual property it brings. In terms of growth, China is adding [the equivalent of] one RBOC per year.
The remaining business restructuring balance sits at about $300 million. The projects for restructuring are approximately 85% complete. Lucent expects to utilize the reserve, and its intention is not to reverse it back into income. The company continues to have a philosophy that it will deal with risk and exposure on a current basis. There is no intention to carry forward problems. Lucent is dealing aggressively with any financial exposure, maintaining a solid posture in that regard.
(Bold accent mine).
What the above tells me is this:
1. Taking advantage of the global opportunities in a market that rapidly is becoming so (global), technological leadership is key in assuring continued growth. In addition, alliances with the local Supremos, possibly turning such alliances in dependency on LU "intellectual property".
2. While exploiting the global market place, it is a solid US company, that will shield LU from the "explosions" of specific economies from time to time, as LU is becoming well diversified. IMO the best of both worlds.
3. "Adding the equivalent of a RBOC a year" (in China), how is that for growth ? (and support of share price based on future expectations).
4. No question that risk exists, however, LU is dealing with it in a current and responsible basis, any possible downturn will be dealt swiftly, reducing the "skeleton in the closet" surprise. If there were to be a negative result the shareholders would be made aware immediately, yes there would be an immediate reaction by the market, but is good to know we have a responsible and open management, as for the risk, well yes, that does exist, life is a risk. I am certain management would deal in a way that it would attempt to reverse whatever negative situation would develop. LU is NOT immune to risk, no one is, however, how the company deals with it makes a big difference. (at least to me it does).
---------------------
As for the local equity market "overbought position", yes definitively a risk, and it could bite anyone, with exposure, there are a number of techniques to deal with such risk, but in truth, that is dependant on each individual sets of objectives.
In addition, given the current economic environment in other countries/markets, I believe that currency risk IMO continues to favor US equities, not to mention the low interest rate environment, and for now reasonable and continuing overall growth of the US economy. (Albeit hick-ups here and there, which may actually turn out to be for the better).
Then we have the aspect that if we are in the final phases of a bull market, sometimes, these markets end in tremendous "blow up" stages (to the upside), I have read that, August 98 may be such, (Trends in Futures newsletter), but do not take that as absolute as it could be wrong, simply another opinion.
Now then, do we hold, sell or buy more......
That is up to each one of us, and yes it depends on the various objectives out there.
For now I like LU and its prospects, but no question, I do have my [nervous] finger in the "sell" button just in case, the Bear boyz decide to "come riding into town".... and no, I do not advance notice of such event taking place.
Meanwhile enjoy the roller coaster with both eyes open wide.
Z. |
