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

To: Mr.Fun who wrote (12647)	1/14/2000 10:07:00 AM
From: The Phoenix	Read Replies (1) \| Respond to of 21876

Mr Fun, Thanks for the response. Here are some additional comments: 2. People are alternately giving LU too much credit for control (financial engineering to pull sales forward to prop up an artificially high growth rate) then too little (accusations that LU has no understanding of customer needs). I'm not sure what this has to do with the current situation. It's pretty clear that LU has been financing their cicuit switch business as a tactic to delay migration. I think they began this a little early since alternative technologies are not fully baked. Still, I fail to see the connection with bringing in revenues to satisfy investors and understanding customer needs. 4. The rise in receivables is a key point in this debate. I have talked to about a dozen LU carrier sales people - in mid '98 Carly decided to simplify sales comp, and eliminated collections as an element of incentive. I believe this is the root cause - that and the $7B Saudi contract. I agree that customer acceptance is an issue on the revenue realization side... but are you saying that part of the miss is due to payroll costs and thus thiner margins? 5. MF seems to think LU has warehouses full of finished CO switches it can't sell. This is silly Are you sure it's finished good inventory they're concerned about? Gary, I agree that the revenue recognition policy tempts customers to use it as leverage and should be changed to match industry norms. I think you are taking it a little far in saying it does not allow them to compete in the fast paced market - why would that be? It creates more risk around quarterly results for investors, but certainly doesn't put them at disadvantage for winning business. Simple. If you have internal financial difficulties it affects a companies ability to compete and do business with their customers. If management is focused on internal problems 20% of the time while their competitors are focused on this 10% of the time they will have a more difficult time competing. It's a focus issue. Secondly, if funds are tied up in this no-man's land of finished good inventory/receivables that is money that is not working...again placing a company that uses this methodology at a financial disadvantage to those that don't. For me, the key aspect about the balance sheet relates to its impact on cash flow NOT earnings. No argument for the most part. Just look at CSCO. I'll go out on a limb - I don't think the 1Q sales and EPS miss was at all related to balance sheet issues - Care to share what it is that makes you feel this way? it had been forcasting a 120% YoY increase in optical which was nearly cut in half due to the supply problems (I was modeling a 75% increase) Yes, this is the focus of the story McGinn is sharing with the investment community. Assuming we buy it (which I have trouble with) you can only come to one conclusion - mismanagement. If you forecast that kind of growth and the business comes in and you don't ship... what's wrong with this picture? That aside this shortfall (again assuming we buy the story) is not $1.2B. Add to this the real chance that once these customers stray (to NT) it will be difficult at best to get them back....a net loss in market share in a key market. 9. The big financing deals are NOT CO switches - wireless is by far the biggest culprit, followed by data networking gear. I believe your thesis about financing "propping up" circuit switches to be flat wrong. We agree to disagree. However you are right that wireless networks are also a big piece of this finance activity. 10. If I were Rich McGinn, my response to this quarter would be: change revenue recognition policy Yes,.... I think you and I talked about this a few months back and I believe my comment was that this policy leaves the control on earning and revenue's in the hands of customers....a very dangerous thing to do. OG