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

To: Kenneth E. Phillipps who wrote (5152)	3/25/2000 4:44:00 PM
From: Kenneth E. Phillipps	Respond to of 14638

Friday March 24, 2000 (4:57 pm ET) "All-Optical Switch" Could Light the Way for Broadband By Mark Cavallone, S&P Equity Analyst NEW YORK, Mar. 24 (Standard & Poor's) - Telecom companies developing new technologies for broadband access and fiber-optic networks are making headway in finding ways to alleviate bottlenecks in existing systems to allow high-speed data services along with traditional telephone service. While some of these advanced products need some time before they are deployed by service providers due to strict testing requirements, I remain bullish about these hot areas of telecom. Optical networking has perhaps been the most exciting and also the most-hyped sector within telecommunications. Suppliers of optical components like JDS Uniphase (JDSU; S&P STARS ranking , accumulate), which is planning to acquire fellow supplier E-Tek Dynamics (ETEK; ), as well as optical systems makers such as Nortel Networks (NT; ) and CIENA (CIEN; , buy), have recently experienced tremendous growth in sales and earnings and even more tremendous gains in stock prices. At the recent Merrill Lynch Global Telecom Investor Conference in New York, which included presentations from both equipment and services companies, one of the most interesting subjects was the concept of an "all-optical switch." Many equipment makers expect to offer optical switches this year that are very efficient at transporting various wavelengths of light to carry both voice and data traffic through a fiber-optic cable. However, these new switches need to transform light to electricity to determine the proper destination for the lightwave. Once this determination has been made, the signal is transformed back into light to continue the journey along the fiber-optic cable. This process slows down the data traffic and also makes the switch somewhat expensive due to the need of electronic conversion. An all-optical switch eliminates the need for this costly conversion by simply directing the light in its current form. A number of intriguing technologies are currently being developed-- involving inkjet technology, micro-electronic mechanical (MEMS) and liquid crystal displays (LCD)-- to create all-optical switches. While several all-optical switches have been demonstrated to work, it will likely be a couple of years before they are actually deployed within a carrier's network because of the extensive testing required. Still, the major equipment vendors are gearing up to offer this type of product to their customers-- perhaps as soon as the second half of 2001. Nortel Networks recently announced a $3 billion acquisition of Xros, a developer of an all-optical switch based on MEMS, while Lucent has announced that it has developed its own all-optical product that is also based on MEMS. While we recognize that the market for this type of product is not fully developed at this time, we believe that all-optical products will be very attractive for service providers who wish to handle the immense amounts of traffic that is expected to flow their networks, while keeping the ultimate costs of the networks at a reasonable level. And even though valuations for the equipment vendors have been pushed to all-time highs thanks to the demand for communications stocks, the fundamentals in the industry remain very strong. Capital expenditures by service providers are likely to increase at a healthy rate, in the mid-teens or so, leading to continued sales and earnings growth for these companies. In addition, the presence of a large and growing number of well-capitalized new carriers known as CLECs (competitive local exchange carriers), who wish to build the most advanced networks, has been a boon to the vendors as new technologies have been implemented far quicker than in the past. In the broadband access area, old and new players including MCI WorldCom (WCOM; ), Covad Communications (COVD; ), Next Level Communications (NXTV) and Terayon Communication Systems (TERN) gave presentations describing their products at the Merrill Lynch conference. The technologies that these companies offer to both businesses and consumers run the gamut from DSL to cable modems to broadband wireless. S&P views this segment of telecommunications as critical to much of the industry's health. In order for carriers to maximize the return from their billions of dollars worth of network investments, the bottleneck at the local level must be solved so that new services and applications can be used more effectively. It is encouraging to see a variety of technological approaches designed to tackle this bottleneck since small businesses, large businesses and consumers often have very different requirements. Though many broadband equipment providers and service providers will benefit from the removal of the bottleneck.; it is clearly not a winner-take-all situation. In many local markets, the service provider that is first to offer a broadband service will ultimately capture the bulk of the subscribers. But with many markets still starved for higher speeds, there is plenty of room for a variety of technologies to prosper. 24-Mar-2000 16:57:46 (02640029)

To: Kenneth E. Phillipps who wrote (5152)	3/25/2000 5:53:00 PM
From: David Kelly	Respond to of 14638

>The Cisco vs. Nortel debates rages on the threads < One of the things that is missing in these debates over who has the technology is the real issue. Who has the sales force to sell into the Telecom provider space. There have been several good articles in "Wired" highlighting the big difference between the packet switched community and the Telecom providers. The long and short of it is if you don't have a sales force that speak the language of the customers it doesn't matter if you have the gear. Nortel is selling into the space having it's lineage being telecom with the best gear available. "You do the math."<g> david

To: Kenneth E. Phillipps who wrote (5152)	3/25/2000 7:53:00 PM
From: Gregory Rasp	Respond to of 14638

I am not sure what to make of a debate between Cisco and Nortel but if you told me this (mentioning NT and CSCO in the same breath) was going to happen when I bought NT (way back when) I would have thought your were nuts. :) GR

To: Kenneth E. Phillipps who wrote (5152)	3/26/2000 2:04:00 PM
From: Bosco	Read Replies (1) \| Respond to of 14638

Hi all - hi Ken, thx for the mention of other threads, as I don't frequent them often. Like Greg, I don't know what to make of them. While I can see some academic excitement of the debate, sometimes, there is also some my-daddy-is-bigger-than-your-daddy. I am perfectly content holding NT, as she will hold her own. I must confess though, even though I don't own CSCO in my stock portfolio, my guess is that it is in some of my mutual fund portfolio, so maybe it is my self-interest wanting to believe both are great companies <g>. best, Bosco