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

To: GVTucker who wrote (14165)	3/24/2000 7:43:00 PM
From: Robohogs	Respond to of 21876

Think of it another way - Cerent traded for $7 billion. How much did it spend on R&D in its life? Certainly not even close to $1 billion. So the multiplier effect of getting the more efficent R&D is huge (i.e., you pay more than is warranted for the efficiency gain except it doesn't penalize the P&L - it is like off balance sheet R&D vehicles used in the past by ELN and AZA in the pharma and biotech worlds (vehicles now outlawed by the IRS unless you want to consolidate their results on balance sheet)). You can have dozens of failed projects and still be better off doing it in-house. At the ultimate end of the day, the cash generated for shareholders is what is key - I would rather have $12 billion (or whatever the number was) of pure R&D working for me any day. The wireless opportunities, the optical, the other networking, the ..... are huge. Sorry for ranting - just tired of stupid markets (what have have you done for me lately? attitude is trying). I find myself slipping into the trading mentality and am trying to protect myself against that. Just another thought - If you grow earnings at 30% per annum until 2007, CSCO is trading at 25x 2007 earnings. If you grow LU earnings at 20% per annum until 2007, LU trades at 12.5x 2007 earnings. Last food for thought - LU has approx. 3 billion shares vs. 7 billion shares for CSCO (round numbers). Based on 2001 earnings - $1.80 calanderized for LU and $0.80 for CSCO, that means that LU will earn $5.4 billion in 2001 and CSCO will earn $5.6 billion. And remember, LU could boost earnings by $1.5-2 billion after tax by cutting R&D to CSCO levels. And CSCO is worth almost 3x LU??? Please help me with the math.