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

To: KYA27 who wrote (10275)	10/19/1999 10:07:00 AM
From: Bindusagar Reddy	Read Replies (2) \| Respond to of 21876

07:28am EDT 19-Oct-99 Warburg Dillon Read (Nikos Theodosopoulos) LU LU: UPGRADING TO STRONG BUY SUMMARY: We are upgrading Lucent to Strong Buy from Buy. Our price target remains at $82, based on 50x our calendar 2000 estimate of $1.65. We believe recent weakness in the stock amid investor concerns about the September quarter and fundamental outlook for the company are unwarranted. The stock is trading at a 20%-25% discount to NorTel and a 45% discount to Cisco. We view this relative valuation discrepancy and our opinion that the company's fundamentals have not changed as a great buying opportunity. HIGHLIGHTS: Stock Weakness: Lucent's stock has significantly under-performed other large global leaders in telecom equipment over the past couple of months. We believe this under-performance has been based on extreme negative psychology on the company's September quarter earnings report due next Tuesday as well as a perceived weakening of the company's fundamentals. We believe these concerns are ill-founded and view this weakness as a great buying opportunity. The relative valuation to the peer group also suggests there is material upside in the stock. Comfortable with September Quarter Earnings Report: We believe Lucent could exceed our estimate for the September quarter and possibly achieve the consensus estimate of $0.29. We are confident that Lucent will also achieve our revenue estimate of $10.3 billion in the quarter. Finally, we expect Lucent to also show improvement in the balance sheet and cash flow generation in the September quarter. We expect AR DSOs to improve from the 93 days reported in the June quarter and we expect inventory turns to improve from the 3.7 turns in the June quarter. We also expect Lucent to remain positive on its outlook for the next fiscal year. Sector Remains Strong: Our research suggests that the fundamentals in the telecom equipment industry remain solid. Lucent continues to show solid growth in its traditional circuit switched businesses while also showing growth of close to 30% in data networking (i.e. Ascend), wireless and optical networking. New products in broadband access such as the Stinger DSLAM should improve the company's positioning in the DSL equipment market. International sales continue to growth materially faster than the U.S. and we expect that to continue into 2000. The company is taking share in South America and Asia, which were not major contributors in the past. Trading At a Discount: Lucent is currently trading at 34.5x calendar 2000 earnings. This compares to 43.8x for NorTel (NT-Buy-52), 63.6x for Cisco (CSCO- Buy-67) and 38.0x for Nokia (NOK-Buy-95). The 20%-25% discount to NorTel and the 45% discount to Cisco is an all time high for Lucent. While we think Lucent, Cisco and Nortel are all well positioned to benefit from the global trends in telecom equipment spending and the convergence of voice and data networks, the current relative valuation and our view that the recent weakness in the stock is unwarranted moves us to a rare Strong Buy upgrade.

To: KYA27 who wrote (10275)	10/19/1999 1:40:00 PM
From: Maverick	Respond to of 21876

ALA said SBC contract was not exclusive Nortel Stock Dips As Rival Lucent Upgraded TORONTO (Reuters) - Nortel Networks Corp (NYSE:NT - news). shares dipped in heavy trading Tuesday after word got out that a U.S. analyst upgraded his rating of rival Lucent Technologies Inc (NYSE:LU - news). Also, news that a French competitor had won an Internet-related contract from America's No. 1 local phone company, SBC Communications Inc (NYSE:SBC - news)., did not help. Shares of Brampton, Ontario-based Nortel dropped immediately after Tuesday's opening bell on the Toronto Stock Exchange, hitting a daily low of C$74.05. Then news of a pact with PSINet Inc (Nasdaq:PSIX - news). was released in mid-morning and the stock began to regroup. It was down C$1.20 at C$76.80 near midday, topping Toronto's most active stock list at 2.3 million shares. ``The stock was headed down sharply at the open,' said Rob MacLellan, analyst at CT Securities. ``It came back after the PSINet news came across the tape.' Nortel makes equipment to push voice, video and data together down telecommunications lines, partly to deal with burgeoning Internet usage. Analyst Nikos Theodosopoulos of Warburg Dillon Read upgraded Lucent to a strong buy, but did not alter his target stock price of $82. Also Tuesday, French telecoms equipment group Alcatel said it had won a contract to supply all the Internet equipment for SBC Communications Inc.'s new $6 billion high-speed Internet access initiative. ``It's not exclusive, but we are, for the moment, the sole supplier for this project,' an Alcatel spokesman told Reuters in Paris, adding he could not yet put a precise figure on the deal. SBC unveiled the three-year Web initiative Monday, putting it into the fight for the fast-expanding Internet market as phone companies shift away from traditional voice services. On the plus side for Nortel, the company announced Tuesday that it was picked by PSINet, an independent commercial Internet service provider based in Herndon, Virginia, to provide optical networking gear for a network expansion. Financial details were not provided. MacLellan added that the buzz on the street was that Nortel's recent deal with Clarify Inc (Nasdaq:CLFY - news)., a profitable U.S. electronic business software maker, seemed to be a little over-priced. Nortel said late Monday it would acquire San Jose, California-based Clarify for $2.1 billion in stock. MacLellan, who has a long-term buy on Nortel, noted that the trading day wasn't over yet for Nortel stock. ``You kind of wonder where it would be if PSINet hadn't come across the tape.'