Most recent comments by Mr. Fun on the Lu thread:
To: hitesh puri who wrote (10361)
From: Mr.Fun Tuesday, Oct 19 1999 8:56PM ET
Reply # of 10564
comments:
1. I run a tech fund. As such, my decisions are based specifically on whether I can beat the S&P tech index. We are slightly ahead Ytd, and we would be way ahead if LU hadn't tanked in July.
2. We are significantly overweight in the networking sector, and have been specifically overweight in the big three stocks LU, CSCO, NT. In recent weeks I have been selling NT to buy more LU, and yes after the last earnings I went from market weight to overweight in CSCO.
3. The game in this business is to be approximately market weight in the biggest tech names and then play 10-20% over or under weights, while taking flyers on smaller names like JNPR which has made us a ton of money.
4. As such, it is not at all inconsistent for me to hold multiple names in both overweight and underweight positions. I will not tell this board about specific trades or exact positions, and limit myself to commenting on just a few stocks.
5. I do think LU is better positioned than Cisco given my observations about the realities of the carrier market. Certainly, alot of the street thinks the reverse, but frankly the consensus is often very wrong. However, I do think that all three of LU, NT and CSCO will do very well - this is not a three-way zero-sum game.
6. Finally, hedge fund rumor mongering need not be based in truth. Sometimes it is, and sometimes it isn't. Those trading on fundamental analysis need to do their homework to decide.
To: hitesh puri who wrote (10090)
From: Mr.Fun Sunday, Oct 17 1999 11:10AM ET
Reply # of 10564
Back from a week in Geneva, some comments:
1. The bears are piling on, but it is a huge mistake. This quarter will be strong. The analysts on LU are a bit like the blind men and the elephant: everyone has a brother in law that works at LU - If he works at BCS, you think the sky is falling; if he works in Optical Systems, you think the company will grow 50% a year. I talked with about 20 LU contacts while in Geneva, and remain convinced that the quarter will be strong on revenues, earnings, balance sheet improvement and cash flow. LU customers also are telling a very bullish story. I didn't see Herb G. in Switzerland.
2. BCS is bitching and moaning like you wouldn't believe. Network Systems and Micro will get significant bonuses for FYend, while BCS will get zippo. Certainly the source for alot of the LU bashing going on. However, BCS is less than 25% of LU - 30% growth in carrier sales (65% of total) and 22% growth in Micro (10% of total) more than make up for the relatively weak 5% BCS growth.
3. There is a big reorg coming. All of the original employees vested their options on Oct. 1. LU will reduce its work force by 20K through early retirement and layoffs, to be announced in November. This is more than 14% of the total workforce (and probably 8% of total costs and expenses). The street should like this move, as long as it is handled smoothtly.
4. Few investors realize this, but NT now trades at a 20% P/E premium to LU, despite lower guidance for revenue and EPS growth. 36 times CY2000 earnings is a ridiculous price for LU, given the strength it has in optical, wireless, software, data, DSPs, opto-electronics, etc. And BTW, if LU's accounts receivable DSOs are so troubling at 92 days, what about NT's at 118, or ALA at 150, or ERICY at 180?
5. This quarter's action is exactly like the March quarter, when several bearish analysts made the call that LU would miss the quarter. If you recall, LU blew out the quarter by 5 cents, delivering 35% YoY growth. LU has very good visability, and will easily make the quarter. Ascend, optical, wireless, software, micro are all having blow out Q's. BTW, Class 5 switches are also having a great quarter (25% YoY growth) somewhat masked by the decline in Class 4 tandem switches.
6. Everyone, hang in there, it's always darkest before the dawn. Dawn comes about 7:00AM on October 26.
Note from Stan...Lu reports on Oct. 26th.
Apollo |
