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Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: polarisnh who wrote (8530)	7/7/1999 11:27:00 PM
From: A. Edwards	Read Replies (1) \| Respond to of 21876

SSB issued earnings preview on telecom equipment cos. Salomon Smith Barney July 7, 1999 OPINION: Despite significant price appreciation over the last several months, we continue to be upbeat on the stocks in our coverage universe due to: strong industry fundamentals for both voice & data/ wireless and wireline; valuations relative to the S&P500 are normal; and expectations are not overly optimistic. EARNINGS DUE July 13-July 27: Most of the telecommunication equipment companies in our coverage universe will be reporting their June quarter results over the next month, so this is an opportune time to preview our expectations relative to consensus. We expect strong operating results from Lucent Technologies (LU,1-M) and Cisco Systems(CSCO,1-M). In fact, we continue to view both companies as core holdings and believe both companies will participate in the dynamic growth in telecommunications equipment spending over the next several years. We expect strong upside surprises and/or we are slightly above consensus on Motorola (MOT,1-M), Nokia (NOK,1-M), Qualcomm (QCOM,1-H), and Tellabs (TLAB,1-M), while Nortel (NT,2-M) should be in-line with expectations and Ericsson (ERICY,3-M), as it has previewed several times now, should report operating results that are below a year ago. LUCENT (LU,1-M,$70 1/16) RESULTS DUE JULY 20, BEFORE THE OPEN * We estimate EPS, excl ASND, should be at least our consensus est of $0.23. * Revenue, excl. ASND, should be close to $8.8 bn vs $7.3 bn last year. * Revenue will be primarily driven by strength in Network Systems due to robust sales in optical, wireless & software, while results at Business Communications are likely to be generally in-line. * Gross & operating margin ests are 44.9% & 11.7%, respectively compared to 45.6% & 10.8% last year * Balance sheet strong. Unlike the March quarter, DSOs in June are likely to be relatively flat Q/Q due to continued strong international bookings. * We will be adjusting our estimates after the quarter to reflect the current quarters results as well as the impact of the Ascend acquisition that should be neutral to earnings in 1999 & accretive to 2000 earnings. We expect strong results from Lucent driven by Network Systems that continues to experience solid gains in the areas of wireless and optical technologies. We expect Lucent will be able to meet or slightly beat our consensus estimate of $0.23. We estimate F3Q99 EPS should increase 36% to $0.23 per share from $0.17 last year. Revenue, in our opinion, should increase to $8.8 billion from $7.3 billion a year ago. Gross & Operating Margins should be 44.9% and 11.7%, respectively, compared with 45.6% and 10.8% last year as Lucent continues to benefit from its leading gross margin position combined with on-going cost reduction measures.