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Technology Stocks : Nortel Networks (NT) -- Ignore unavailable to you. Want to Upgrade?

To: Doug who wrote (4192)	1/7/2000 2:14:00 PM
From: Kenneth E. Phillipps	Read Replies (2) \| Respond to of 14638

Nortel shares surge as rival Lucent stumbles ET January 7, 2000 By Susan Taylor OTTAWA, (Reuters) - Shares in Nortel Networks Corp., one of the world's biggest communications equipment makers, staged a stellar rally Friday as the market determined that its competitor Lucent Technologies' loss was Nortel's gain. Brampton, Ontario-based Nortel reaffirmed confidence in its 1999 and 2000 financial results late Thursday, in contrast to bellwether phone gear supplier Lucent Technologies Inc.'s surprise first-quarter earnings warning earlier in the day. Investors, who streamed out of Nortel shares in after-hours trade Thursday came flooding back Friday, realizing that Lucent's expected $1-billion sales shortfall was tied to execution issues rather than to weakness in the equipment market. Lucent expects revenue of $9.8 billion to $9.9 billion in the quarter, flat over last year. The bulk of its problems, the firm said, were tied to its inability to meet demand for fiber optic network gear -- a key Nortel strength. Nortel shares added C$9.85 on the Toronto Stock Exchange in heavy morning trade as two million shares traded Friday. The gain of nearly 8 percent to C$133.95, was mirrored by a surge in New York where the stock appreciated 6-5/8 to 91-7/8. Meanwhile, Lucent continued its decline Friday, dropping 22 percent, or 15-4/16, to 53-13/16 on New York. Competitor Cisco Systems Inc. , the largest maker of equipment that powers the Internet, picked up 3-7/16 to 103-7/16 on the Nasdaq after it also reassured investors Thursday it had no guidance changes for its current second quarter. "If you sift through all the (Lucent) management explanations, what comes out of it is the market is moving almost entirely to 10-gigabit systems, which is almost entirely dominated by Nortel," said John Wilson, analyst at Bunting Warburg Dillon Read Inc. in Toronto. Lucent won't have 10-gigabit optical gear comparable to Nortel's offering until mid-year, he added, which leaves Nortel well-positioned. "We believe Nortel's got a huge Q1 and Q2 in front of it," said Wilson. "We think it's (stock is) going a lot higher -- we have a $125-target.", Nortel said late Thursday it was "very" comfortable with its prior guidance on 1999 and 2000 financial results. It expects to post 1999 revenues between $21.5 billion and $22 billion versus $17.58 billion in 1998. Net earnings per share from operations for 1999 are expected to be up about 20 percent, the company added. Nortel will announce fourth-quarter and fiscal 1999 results after the close of market January 25. "Any time your competitor stumbles is good and for them (Lucent) to stumble in a seasonally strong quarter gives a little bit of icing on that cake," said Patrick Houghton, analyst at Sutro & Co. in San Francisco. "The single fastest growing sub-segment of the telecom market is optics and Nortel, which is half the size of Lucent, has the same or maybe even slightly more market share in optics than Lucent. So you're getting twice the bang for your buck with Nortel." Houghton, who reiterated a "strong buy" on Nortel and price target of $115 Friday, said the company needs to continue its aggressive efforts to dominate its market. Nortel announced Thursday it plans to spend up to $778-million in stock to buy California's Promatory Communications Inc., which develops high-speed Internet access gear. A recent shopping spree includes a December 15 stock deal worth up to $3.25-billion to buy Florida's Qtera Corp., which makes optical gear that helps fiber optic networks run faster, better and cheaper. "The challenge for Nortel is not to get complacent and keep on pushing the execution and the leading edge of products," said Houghton.