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

To: The Phoenix who wrote (10493)	10/21/1999 4:09:00 PM
From: Kenneth E. Phillipps	Read Replies (2) \| Respond to of 21876

OT - Gary - Did they have a cable telephony product at that time? kep

To: The Phoenix who wrote (10493)	10/21/1999 6:49:00 PM
From: hitesh puri	Respond to of 21876

Oh my. Cramer just fessed up in his latest report (linked from Yahoo) that he was awfully wrong in his judgement of the negative spillover IBM would have caused today on the NAZ. He leaned very heavily towards a blowup in all tech and was caught with this pants down with a bucket of vaseline being handed to him. Hedge fund managers can be really wrong at times and it can cost them a lot. Hope LU can do the same. -Hitesh

To: The Phoenix who wrote (10493)	10/21/1999 10:33:00 PM
From: Maverick	Respond to of 21876

CSFB Reiterates Strong Buy;Supplier Concerns Overdone; Outlook Remains on Track Supplier Concerns Overdone; Outlook Remains on Track; Reiterate Strong Buy 10/11/99 Summary Recent supplier announcements reflect LU inventory adjustments as opposed to end-demand weakness; LU executing on plan to enhance working capital efficiency which represents a key facet of our investment thesis. Anticipate upbeat comments and announcements from Telecom '99; Focus will be international, wireless, and to a lesser extent optics opportunities. Project FQ4:99 will be in line with our $10.15 billion top-line forecast; Assign highest probability to EPS in the range of $0.30-$0.31, above our $0.28 estimate and the consensus estimate of $0.29. Estimate mgmt will reaffirm outlook on FQ4:99 conference call; Key themes for fiscal 2000 include securing additional market share gains, improving balance sheet quality and rationalizing organizational structure to enhance competitive and financial performance. Our 9 month price target equals $80, 25% above current levels. Price Target Mkt.Value 52-Week 10/08/99 (9 Mon) Div. Yield (MM) Price Range $64.00 $80 $0.08 0.1% $201,216.0 $79.75-31.81 Annual Prev. Abs. Rel. EV/ EBITDA/ EPS EPS P/E P/E EBITDA Share 9/00E $1.52 42.1X 142% NA NA 9/99E 1.19 53.8 165% 9/98A 0.84 76.2 178% Dec. March June Sept. FY End 2000E $0.55 $0.24 $0.34 $0.39 Sept-30 1999E 0.49 0.17 0.25 0.28 1998A 0.40 0.08 0.15 0.21 ROIC (6/99) NA Total Debt (6/99) $6,792 Book Value/Share (6/99) $3.94 WACC (6/99) NA Debt/Total Capital (6/99) 35.4% Common Shares (mil) 3144.0 EP Trend2 NA Est. 3-Yr. EPS Growth 25-30% Est. 3-Yr. Div. Growth NA 1On 10/08/99 DJIA closed at 10649.76 and S&P Industrials at 1645.46. 2Economic profit trend. Lucent Technologies is a leading global provider of public and private networks, communications systems and software, data networking systems, business telephone systems and microelectronic components. Recent supplier announcements reflect LU inventory adjustments as opposed to end-demand weakness An earnings pre-announcement on Friday by Hi/Fn Inc., a designer and manufacturer of high performance packet processors created concern among investors that Lucent Technologies, a Hi/Fn customer, could be confronting a deteriorating end-demand outlook. This follows an August 26th, 1999 announcement by Plantronics, another Lucent supplier that its Fiscal 2000 revenues would be below expectations. Plantronics is a major manufacturer of telephone headsets that are widely used by business customers. Both Hi/Fn and Plantronics cited Lucent directly as a significant contributor to their revised downward sales outlooks. We would attribute the changes in Lucent's order patterns with certain suppliers to inventory adjustments as opposed to an indication that Lucent's end-demand outlook is deteriorating. In fact, one of the central tenants of our investment thesis on Lucent is that the company would begin to deliver an improving balance sheet performance during the next several quarters sparked by increasing inventory turns and declining accounts receivable DSOs. We view these supplier announcements as concrete evidence that the company is focused on delivering our forecasted improvement. By our calculations, inventory turns have declined on a pro-forma basis for the acquisition of Ascend Communications from 5.5 times for the September 1998 quarter to 3.7 times during the quarter ending June 1999. We estimate the company reversed this trend in the September quarter and project management will outline its prospects for additional gains in terms of inventory turns during fiscal 2000. In addition to improving inventory turns, as we have outlined previously, we estimate Lucent will record at least a five day sequential decline in accounts receivable DSOs for the quarter ending September 1999. This suggests DSOs will be in the high 80s, down from the low 90s recorded for the three months ending June, 1999. We believe the combination of improving inventory turns and accounts receivable DSO results will begin to eliminate the "bear" case on the stock. The "bears" have been trumpeting Lucent's deteriorating earnings quality during the first half of 1999. As such, we believe delivering an improved balance sheet will be an important positive catalyst for LU shares. Anticipate upbeat comments and announcements from Telecom '99; Focus of LU announcements will be international, wireless, and to a lesser extent optics opportunities Lucent will be hosting several investor meetings at the Telecom 1999 show in Geneva, Switzerland this week. We believe the tone of these events will be positive reflecting the company's strong prospects. A featured speaker at the events will be Ben Verwaayen, Executive Vice President and Chief Operating Officer. We expect Mr. Verwaayen to outline Lucent's ongoing progress in enhancing the company's penetration of international markets. Lucent has posted stellar top-line growth overseas in recent quarters (66% advance in international sales was recorded by Network Systems in the June quarter). We expect Mr. Verwaayen to reiterate Lucent's ability to grow significantly above market rates internationally on the strength of a strong product portfolio and emphasis on systems solutions. Product highlights in international markets include optics, packet, and wireless. In addition, there are several industry catalysts that suggest strong growth will continue internationally including the ongoing deregulation of telecom services in Europe and an improving macro-economic outlook in Asia. We believe Lucent will also focus on its success in wireless where the company has posted significant market share gains principally in North America in recent quarters . Management is likely to provide additional information on the company's positioning in 3G technologies and wireless data during the event. Project FQ4:99 will be in line with our $10.15 billion top-line forecast; Assign highest probability to EPS in the range of $0.30-$0.31, above our $0.28 estimate and the consensus estimate of $0.29 We believe Lucent posted a solid fiscal fourth quarter performance. We estimate revenue will total $10.15 billion in line with our estimate. The strongest areas of the company's businesses included Network Systems, approximately 62% of sales (project 21% growth for the quarter) led by wireless, packet networking, software, and optics. Our checks indicate the company's switching and access segment of Network Systems posted results in line with the company's plan indicating the shift from circuit to packet based architectures continues to proceed in an evolutionary manner which is consistent with our investment view. We estimate Lucent's Business Communications Systems and Microelectronics units recorded top-line growth in line at 8% and 20% respectively. The modest upside surprise we are forecasting will be a function of gross profit margin above our 47.8% estimate and slightly lower operating expense levels as a percent of sales relative to our forecast. Estimate mgmt will reaffirm outlook; Key themes for fiscal 2000 include securing additional market share gains, improving balance sheet quality and rationalizing organizational structure to enhance competitive and financial performance We believe the tone of Lucent's FQ4:99 conference call will be positive reflecting the company's ability to post additional market share gains, improving balance sheet performance and increasing emphasis on enhancing organizational efficiency. We do not anticipate substantial upward revisions to fiscal 2000 earnings guidance after the FQ4:99 conference call as we are already forecasting 28% earnings growth for the fiscal year on a revenue advance of 18%. However, consensus could increase by several pennies for fiscal 2000 (current consensus equals $1.51). We continue to believe the potential exists for an upside surprise to our top and bottom-line estimates for fiscal 2000 but believe significant upward revisions are likely to emerge after the December quarter. In terms of market share gains, we believe the company will reiterate its ability to take share in important growth markets including optics, wireless, packet networking, and software. We believe management will be particularly bullish on the outlook for optical system shipments for the December quarter. Another initiative that we believe Lucent management will be focused on during fiscal 2000 is improving the company's organizational structure to enhance its competitive position. Time to market is becoming increasingly important in telecom equipment and our research indicates Lucent management is targeting an improvement in the company's ability to rapidly deliver products and services. This could translate into organizational realignments including shifting resources to higher growth segments of the business from slower growth businesses that are delivering less than 10% annual sales increases. In addition, given the large number of recent acquisitions by the company, we anticipate management could indicate that it would move even more aggressively to eliminate redundant development initiatives. For example, Lucent's internal packet networking development initiatives could be significantly realigned following the acquisitions of Ascend Communications, Nexabit Networks and Xedia. The result could be layoffs in select areas to improve efficiencies and to streamline the organization. We would view these efforts positively.