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

To: Mr.Fun who wrote (8971)	8/2/1999 2:41:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 21876

Mr. Fun, Thanks for your assessment -- I think we are in total agreement here. Improved capital efficiency will inevitably lead to improved earnings along with a host of other benefits. You noted: Early on, LU management articulated its challenge as "5 simultaneous equations" 1)Improve gross margins, 2) sustain or grow investment in R&D, 3) Reduce SG&A (target remains 17.5% of sales), 4) Reduce tax rate, 5) Improve ROA (target remains 10%) Now it appears to be adding a sixth - Improve operating cashflow. I would simply point out the obvious. Improving cash flow will -- improve gross margins by lowering inventory handling costs -- decrease interest cost by reducing the reliance on debt; -- provide the funds necessary to sustain rapid growth; -- Increase ROA through the reduction in assets necessary to produce earnings. I agree with GVTucker's point that if LU's inefficiencies can be mitigated the company is poised for a quantum leap. For the reasons I outlined above, I believe that improvement in operating efficiencies must be management's top priority. TTFN, CTC