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

To: Chuzzlewit who wrote (8986)	8/3/1999 8:08:00 PM
From: Mr.Fun	Read Replies (3) \| Respond to of 21876

Chuzz, Some interesting tidbits: 1) I was surprised to hear from a LU employee who should know that their International DSOs are not significantly worse than the US. The key is that Europeans demand longer payment terms up front, but are more punctual in actually paying according to agreement, while RBOCs play all sorts of games with reconciling invoice to purchase order to delay payment. There is a huge push to work problem accounts earlier in the collection process to speed payments that is apparently beginning to bear fruit. I'm told to expect 6-8 DSO improvement for Sept. 2) Cash to cash cycle is a good metric, although it is very important to set the benchmark in the right place. Obviously Dell blows away Cisco which blows away Tellabs, which blows away Lucent, which blows away Nortel, which blows away Ericsson. The biggest factor in the differences between these very different companies is the average lead time from order to invoice, followed by collection period. Lead time on a PC is measured in days, on LAN switches is measured in weeks (2-3), on high end routers - weeks (6-10), Digital cross connects - months (3-5), CO switches months (6-9). 3) In the long run, your concern about the temporary nature of cost improvements is well taken. However, it is not unreasonable to assume operating margin improvements in the vacinity of 100 -150bp per year can continue for a minimum of 5 years. This benefit is material to investors, and should be an important consideration in assessing the value of the company. BTW someone explain to me why posters continue to suggest McGinn has done nothing to improve operations when operating margins have more than doubled since LU has become an independent company. 4) Somewhere along the line, good old fashioned earnings growth seems to have gotten lost in the shuffle. Until 1998, accelerating the bottom line was the clear driver of networking stock performance. I believe EPS will again mean something, and soon. 5) If LU delivers against their guidance for improvements to DSOs and inventory turns, it will deliver an operating cash bonanza of billions over the next several quarters as well as fueling further improvement to COGS.

To: Chuzzlewit who wrote (8986)	8/4/1999 9:21:00 AM
From: elmatador	Read Replies (1) \| Respond to of 21876

When LU (or NT for that matter) goes out of the US, does not mean that it, necessarily, goes to Europe. It goes to South America which is a big market for infrastructure. There LU have to open a production facility for mobile terminals, for instance like Brazil which has 20% tariff in the imported eqt. Then LU have to provide vendor financing, because those new operators there spent all their money buying the licenses. There the project implementation takes longer than the US developed market. You know, they are not used to the competitive pressures being just out of the state owned enterprise mind-set. This means more work in progress and more inventory. I think that this work in progress, inventory, vendor financing end up affecting LU's cash flow. Mine is the perspective of a network builder.