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

To: Kenneth E. Phillipps who wrote (10494)	10/21/1999 4:11:00 PM
From: The Phoenix	Read Replies (1) \| Respond to of 21876

NO...

To: Kenneth E. Phillipps who wrote (10494)	10/21/1999 10:38:00 PM
From: Maverick	Read Replies (1) \| Respond to of 21876

HQ is comfortable w/ estimates; maintain BUY Date: 9/8/99 Mid-Quarter Update; Comfortable With Estimates * Meeting with Lucent management leaves us comfortable with our $10.3 billion revenue estimate and $0.29 EPS estimate for current quarter * Business continues to be driven by the System for Network Operators (SNO) group * We are looking for continued balance sheet improvement this quarter * Maintaining FY99 and FY00 EPS estimates of $1.20 and $1.50, respectively, and BUY rating 1998 A 1999 E 2000 E Q1 EPS $0.43 $0.49A $0.54 Q2 EPS 0.07 0.17A 0.26 Q3 EPS 0.17 0.26A 0.30 Q4 EPS 0.21 0.29 0.41 FY EPS 0.88 1.20 1.50 FY REVS (M) 31,097 38,028 44,750 CY EPS 0.93 1.25 1.60 CY P/E 72.2 53.8 42.0 FY Ends Sep Current Price $67.19 52-Week Range $80-27 Market Cap (M) $211,917 Shares Out (M) 3,154 Book Value $4.06 Net Cash/Share $0.47 Growth Rate 20% CY00 P/E-to-Growth 210% Yesterday, we had an upbeat meeting with various members of Lucent Technologies management, including CFO, Don Peterson. Our take in the current tone of business is that the quarter is tracking according to plan, and as a result, we are comfortable with our F4Q99 revenue estimate of $10.3 billion and our F4Q99 EPS estimate of $0.29. This quarter's business continues to be driven by the company's wireless and optics business and market share gains internationally. In terms of operating expenses management reaffirmed in intention to continue to reduce op-ex, as a percentage of sales, and confirmed that this should be the case this in F4Q99. In terms of the balance sheet, we are looking for some sequential improvement with DSOs declining approximately 5 days (from 92 days in the previous quarter) and for a sequential decline, in absolute dollars, in inventory (inventory was $5.2 billion in the previous quarter). Despite management's recent conservative comments regarding a possible Y2K slowdown in carrier spending in the December quarter, we do not believe that there should be any meaningful impact in the December quarter. Overall, we believe that this quarter is on track and as a result we are comfortable with our estimates. We are maintaining our FY99 and FY00 EPS estimates of $1.20 and $1.50, respectively, and our BUY rating. SNO continues to drive overall growth The company's Systems for Network Operators group continues to show strong year over year growth, we are currently estimating 30% growth year-over-year (including Ascend). This growth is driven by the wireless and optical segments as well as continued market share gains internationally. Recent wireless infrastructure win at AT&T (where LU replaced Ericsson equipment in the Northeast region) and continued strength in Brazil are highlights in this segment. The company's optics business continues to be robust, its 80-channel WDM product, which began shipping in November 1998, is now shipping to 30 customers, and the OC-192 product is currently in trails with one customer and should be commercially available by the end of calendar 1999. While the overall circuit switching business is growing modestly, the underlying trend is that the class 5 switch business is exceedingly strong while the class 4 switch is under pressure. Overall, the SNO group seems to be showing surprising strength in the quarter. We continue to have an optimistic outlook for other businesses The company's Business Communications Systems (BCS) group continues to have mixed results, we are currently estimating essentially flat year-over-year results. This estimate reflects respectable double digit growth in PBXs and messaging systems business that is offset by weakness in the Systimax, the company's copper and fiber business that has come under pricing pressure. We believe that the company's Microelectronics group is on pace for high teens growth. Quarter tracking in-line, maintaining EPS estimates and BUY rating Overall, we came away from the meeting believing that the current quarter is tracking according to plan and are comfortable with our revenue estimate of $10.3 billion and EPS estimate of $0.29, while acknowledging that the business is increasingly dependant on the third month of the quarter. The drivers of the business remain essentially unchanged, they are wireless and optics. We view the continued penetration of international markets as upside to our estimates. The company's balance sheet, which has been a focus on attention in recent quarters, should continue to improve with DSOs trending down and inventory decreasing, on an absolute basis. We are maintaining our FY99 and FY00 EPS estimates of $1.20 and $1.50, respectively, and our BUY rating.