05:53pm EST 16-Dec-99 Gruntal & Co (Michael Davies 212-820-3645) LU LU.N
COVERAGE OF LUCENT TECHNOLOGIES INITIATED WITH 1-1 RATING
Story 2665 (B/OH C/CNA C/CUS I/CMT LU LU.N LUTI-D S/INI S/MMN)
Gruntal & Co. L.L.C. Equity Research Note
December 16, 1999
Michael S. Davies, CFA Debra Bernstein
(212) 820-3645 (212) 820-3611
daviesm@gruntal.com bernsted@gruntal.com
Company: Lucent LU - $78.69 a/o 4:00 PM EST
Technologies, Inc.
Industry: Telecommunications
Equipment
Intermediate 1 - Outperformer Target Price: $100
Rating:
Long-Term Rating: 1 - Outperformer Target Price: $120
Suitability: Low Risk
COVERAGE OF TELECOM LEADER WITH BROAD ARRAY OF TECHNOLOGIES
.
* Largest company with the broadest array of technical
competencies in the entire telecom market.
* Leading market position in the fastest-growing segments (e.g.,
optics, wireless, switching).
* Talented management team with a focused strategy to grow the
data networking business.
Annual Dividend: $0.08 P/E 2000E: 55x
Yield: 0.10% P/E 2001E: 44x
Bk Val/Shr 1998A: $4.07 52-Wk Range: $84-$47
ROC (LTM) 17% 1999A Cash $0.58
Flow/shr:
Inst. Hldgs: 43.9% 3-yr Est. EPS 22.76%
CAGR:
Insider Hldgs: 2% Shares Out (Mil): 3172
Next Reporting Date: January Market Cap (Bil): $249.6
18, 2000
Year-End September Float (Mil): 3022.37
EPS ($) Q1 Q2 Q3 Q4 Year Consensus
1998A $0.41 0.08 0.17 0.21 $0.86 --
1999A $0.49 0.17 0.26 0.31 $1.22 --
2000E $0.54 0.27 0.29 0.35 $1.44 $1.52
2001E $0.69 0.34 0.35 0.42 $1.79 $1.86
2002E $0.82 0.39 0.43 0.52 $2.17 $2.12
Rev ($mil) Q1 Q2 Q3 Q4 Year
1998A $9,079 6,511 7,642 8,574 $31,806
1999E $9,741 8,672 9,315 10,575 $38,303
2000E $11,810 10,239 10,970 12,430 $45,449
2001E $14,058 12,057 12,841 14,637 $53,593
2002E $16,813 14,234 15,090 17,329 $63,466
E = Estimate, A = Actual
Investment Summary
Lucent Technologies, Inc., the spin-off of AT&T (T-NYSE-$53.38-
Not Rated), is an all-around leader in terms of market share and
breadth of technical competencies. The combination of Ascend and
Lucent will create the largest and probably best-positioned
company in the telecommunications industry. Ascend, which Lucent
acquired in June 1999, is the leader in wide area network (WAN)
switching for data traffic. The acquisition enables Lucent to lead
in the voice, wireless, optics, and data networking markets.
Besides having the broadest base of technologies, Lucent is the
largest telecom equipment supplier. Its capabilities range from
microelectronic components and chips to software, systems, and
services. Lucent has a talented management team and the confidence
of customers in its ability to manage the transition from voice to
data networks. Lucent has the reputation among service providers
for installing and maintaining highly reliable and available
networks. It also has the capabilities to design, deploy, and
integrate large multiservice networks on a global basis. Lucent's
acquisition of Nexabit in August 1999 provides critical Internet
protocol (IP) routing technologies which are needed to compete in
the data market. Although the trend favors IP technology, service
providers derive the majority of the their revenues from voice
traffic, which is based on high network reliability. Lucent's
network integration competencies could mitigate the lack of
leading position in IP routing. We have initiated coverage on the
common stock of Lucent Technologies with intermediate- and long-
term investment ratings of 1-1, Outperformer-Outperformer. Out
intermediate- and long-term target prices for the shares are $100
and $120, respectively.
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