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

To: Drake who wrote (10610)	10/24/1999 11:10:00 AM
From: William Hunt	Read Replies (1) \| Respond to of 21876

Drake ---this report says the same thing that gc said also reiterates what I have been saying about management being proactive and presenting an image of having control of the issues listed below . If they are right we could have dead money for the next two qtrs . LUCENT TECHNOLOGIES INC (LU) 12 Mo. Rating: HOLD Argus Company Report © 1999 Argus Research Corporation 212 425-7500 The LU shares traded midday Monday at $56-1/8, down 2-7/8. (DT) October 15, 1999 - We are lowering our short-term rating on Lucent Technologies (NUSE: LU) to HOLD from BUY. Lucent is also being removed from our Portfolio Selector listings. We are retaining our long-term rating of BUY on the stock. Ahead of Lucent's earnings release for its fiscal fourth quarter, due on October 26, we are reducing our EPS estimate to $1.14 from $1.17 for fiscal 1999. We are also reducing our estimate for fiscal 2000 to $1.37 from $1.39. We are concerned that U.S. revenue growth for 4Q of FY1999 and for next quarter, 1Q of FY2000, may come in lighter than previous quarters. U.S. sales accounts for about two-thirds of total revenue. Given Lucent's consistent track record of growth over the past three years, any departure from this history would be greeted with some dismay by the market. We believe that there is the possibility of considerable volatility in the stock price when the revenue numbers are announced. While a move down to the mid- to low-50s range may present a buying opportunity, we want to caution our clients about the near-term volatility and downside risk. The stock is trading at about 44-times our estimate for fiscal 2000. This premium valuation leaves little room for missteps in execution. Our concern is supported by news reports of possible layoffs among software workers at Lucent's New Jersey facilities. The Star-Ledger of Newark, N.J. reported that about 260 jobs are being eliminated in the communications software unit and that employees had an October 15 deadline to accept a voluntary severance package. While the number of workers affected is small in a company of more 150,000 employees worldwide, we believe the restructuring may be more widespread than was reported. We believe that management may be under more pressure to cut costs and overhead in light of the softer domestic revenue growth. LUCENT TECHNOLOGIES INC (LU) Page: 2 Argus Company Report © 1999 Argus Research Corporation 212 425-7500 higher cost structure than rivals Cisco Systems and Nortel Networks. Lucent's Selling, General and Administrative expenses run in the range of 21-22% of revenue, compared with the 17-18% range of Nortel. Cisco has the advantage of fatter gross margins than Lucent. One of the reasons for Lucent's higher costs is the legacy of functions and organizations that has not been completely eliminated since the AT&T days. Another factor is that Lucent has acquired a slew of companies over the past 18 months that range in size from tiny start-ups to billion dollar enterprises such as Ascend Communications. While these acquisitions have brought valuable new technology to Lucent, they have also brought more workers into the Lucent empire. Some of product lines that came with the acquisitions have proven to be duplicative. For example, there were overlapping products between Ascend and Livingston. Cutting back duplicative products and functions means that some positions also have to be eliminated. We believe that up until recently, management has been less than aggressive in eliminating these positions, preferring instead to make sure that any holes in its product and technology portfolio were filled. Given the tremendous demand for communications switches and equipment by service providers, we still believe the long-term picture for Lucent is bright. Telecom and Internet service providers need systems and software that can carry the traffic demands on their networks. We still believe that Lucent is an excellent company that is well positioned to capture this demand. Over the short-term, we see some operational and execution issues that management must address. The HOLD-rated LU shares traded midday at $60-5/16, down 1-9/16. (DT) BEST WISHES BILL

To: Drake who wrote (10610)	10/24/1999 5:56:00 PM
From: gc	Respond to of 21876

Drake, have you listened to LU's cc last quarter? What, if any, do you think, that has caused the stock to tumble from 80? It was because the earning outlook was reduced. Why was it reduced? According to LU, it was due to its effort in "smoothing out seasonality." Is that believable? The market said no. personally I have doubt too. If it were all planned out, LU would have (and should have) informed investors at beginning of the year. Could that be y2k issue? or competitive pressure from Nortel and Cisco? I have no idea.