The Fabulous Market Babe Stock of the Day
12/07/98
Lucent Technologies / LU
Given the renewed interest in this one as of late, I thought an update was in order.
Not to worry though, this is not going to be a rehash of what was seen and heard at the CSFB conference last week, but will
focus on the future, as opposed to just the here and now.
After all, true understanding of the future direction of a company, especially in technology, is a tad difficult to find these days.
Not to mention that it provides much greater confidence when the market and the group inevitably starts getting the shakes.
But before we start, if you would like a review of past comments on the mighty LU, feel free to take a pick from the CSCO vs.
LU column, the This is Getting Ridiculous column and A Few Reasons to Refocus on Lucent column.
The key for LU as the telecommunications industry continues to amaze and surprise by the leaps and bounds, is to continue its
focus on the area of photonics. As such, this column will focus on what photonics is, why the field is important to LU going
forward, as well as what specifically LU is doing to dominate the field.
First off, just clear up any questions you might have with regards to this area, please be aware that photonics is not the marriage
of robotics and photography.
However freaky and therefore massively interesting that combo may be.
That said, a photonics devices is any device that changes, processes or transmits light. A simple example includes lasers that
generate optical signals which, in turn, are transmitted by glass fibers, another photonics component.
So why is all of this significant?
Photonics components are able to move data whether it be voice, audio and/or video faster than electronics devices that are
currently doing the job.
And, for all of you short-attention spans out there (myself included), we know what this means.
Faster service.
In other words, photonics devices enable more data to be pushed through the "pipe" at faster speeds.
So what does this mean for you and I?
Try much faster Internet connections, as well as decreased costs to the consumer to start out with, as the Internet continues to
drive the demand for increased bandwidth, not to mention more information capacity, i.e. optical storage (the ability to store data
optically, such as on a CD or DVD.)
So now let's relate all of this "big picture" stuff specifically to LU.
To sum it all up, LU makes the equipment that makes all of the above happen.
Whether it be components for heavy duty areas such as optical networking (hooking up computers or telephones via optical
fibers), or inventing new optical heads (the component in your CD player which "reads" the data on the disc), LU clearly has its
fingers in almost every pie in this area.
Which, in its own right, is very significant, because if an individual wants to make a bet in this area, the surest way of going
about it is to invest in the company that has a chokehold on the field, as opposed to investing in a company whereby the product
line is centered on one or two optical components.
If only for the reason that LU will more than likely stomp all over them anyway in the long run.
So, to look a bit into the future, what's the goal here in this industry?
Without a doubt, all optical networks.
Unfortunately though, that's anywhere from 10 - 15 years away.
As such, the stepping stone to the above has been blending optical networks with the current electronically based networks,
otherwise known as optoelectronics, a burgeoning field that will continue to be on the cutting edge for the next 5 - 10 years.
And yes, LU continues to lead the way here as well.
By leaps and bounds no less.
So let's now turn to the next question that is probably on a few of the minds out there.
What about CSCO?
With regards to CSCO, it is simply untrue to state that CSCO does not have an eye on the above as well, as they very much do.
However, LU possesses one overwhelming factor here that CSCO does not.
Bell Labs.
As such, CSCO has a record of continuing to acquire those companies to fill in the gaps in product lines that LU has had for over
100 years.
And the most important aspect in all of this would be...
Acquiring and retaining intelligent, innovative and creative people. As such, it is very important, especially from a timing
standpoint, that CSCO's pace in its foot race with LU not be slowed down due to integration issues with the acquisitions that it
continues to make.
In short, CSCO can ill-afford to have the industry pass them by.
In wrapping this all up, let me make one final point. Within the realm of data networking, it is very important to note that the field
which possesses such overwhelming growth potential both now and far into the future, is able to support not one but two
dominant players, LU and CSCO, as well as a host of smaller companies.
Which says quite a lot, especially when compared to a company such as MSFT, where its growth in the industry as well as its
ability to stay on top, is determined by an near or total elimination of the competition.
Yes, just a bit more business to go around in networking. |
