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

To: KYA27 who wrote (10184)	10/18/1999 4:32:00 PM
From: puborectalis	Respond to of 21876

October 18, 1999 4:04 PM Lucent Can't Beat the Rumor Mill By Alec Appelbaum LUCENT TECHNOLOGIES LU 56.94 -2.06 -3.49% NORTEL NETWORKS CORP NT 52.38 -0.31 -0.59% CISCO SYSTEMS CSCO 67.38 0.19 0.28% DJIA 10116.28 96.57 Nasdaq 2689.15 -42.68 Rus. 2000 408.90 -5.80 10/18/1999 4:30PM ET PSSST...have you heard the rumor about Lucent Technologies (LU) -- the one about the company's getting ready to report a disappointing fourth quarter due to heavy spending on acquisitions and new technology? Enough traders have picked it up that the stock has lost about 14% over the past week -- including a 3.4% decline today. Lucent now sits almost 30% off its 52-week high of 79 3/4 hit in mid-July. And while rivals Nortel Networks (NT) and Cisco Systems (CSCO) are also off their highs, they have smoked Lucent over the last 12 months with gains of more than 200% and 140%, respectively. Lucent is up about 60% over the past year. Analysts -- most of whom just returned from the Telecom '99 show in Geneva -- are baffled by the rumor. Mary Henry of Goldman Sachs told participants in a conference call this afternoon that she wasn't worried about any negative news from Lucent this quarter. And Sanford Bernstein's Paul Sagawa scoffs at all the whispers. "I hear from inside the company that the quarter is terrific," fumes Sagawa, who once worked for Lucent when it was still part of AT&T (T). "There's one part of the company where performance has been less than planned, and that's Business Communications Systems, which [comprises] 24% of the company." Grumbling in that division may have leaked into the trading pits, Sagawa says, causing speculation about a disappointing performance overall. While Goldman's Henry said not to expect a surprise, she did say the quarter is shaping up as something of a "mixed bag." Lucent sales of gear for wireless and optical networks are surging. But AT&T's decision to delay spending on a high-grade network switch had "probably cost Lucent $1 billion in sales over nine months," Henry said. She also cited the company's Systimax division, which offers customized wiring, as a lackluster performer and a candidate for a possible sale. AG Edwards' David Heger, who raised Lucent from a Hold to a Buy rating in August when its price sagged a little, has also heard the rumors but doesn't hazard a guess as to their source. He says corporate nervousness about Y2K issues, and not weakness in Lucent's products, has kept the company's sales of equipment to individual businesses somewhat lower than analysts had expected. Lucent, of course, has been adding businesses frenetically over the past two years. Today it closed on a $4.3 billion acquisition of Transaction Network Services, bringing a large cadre of consultants and other service specialists into its fold. The acquisition underlines Lucent's desire to keep the loyal customers it has built up among phone companies as it spends more time and money on ambitious Internet-based equipment. Sagawa wouldn't be surprised to see Systimax go, since it "is about as old-fashioned a business as exists in Lucent," and he wouldn't be sorry either. He endorses the new emphasis on services and consulting as a "significant shift in strategy" that should pay off with new orders from old customers. "The Lucent booth [in Geneva] was a love-fest!" he insists, with big service companies thrilling at Lucent's new offerings. Nonetheless, CEO Rich McGinn must deliver on some big promises when the company reports quarterly results on Oct. 26. He has vowed to cut the average time Lucent waits to collect receivables and how long it holds goods in inventory. And he has promised strong revenue growth throughout the company. According to Sagawa, all appears to be on track. "The stock is way, way oversold," he says.