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

To: Kenneth E. Phillipps who wrote (5370)	4/17/2000 6:46:00 PM
From: Mr.Fun	Read Replies (1) \| Respond to of 14638

Kenneth, This MF analysis is, like most MF analyses, totally superficial. Of course, I think that they have stumbled upon some interesting points. Some data: 1. NT's EPS for 99 was ($0.10) if you include the amortization of goodwill and in process R&D from the Bay acquisition. This amounted to $2.1B in 99 and will be approximately $1.9B in 00. Like Cisco, NT has chosen to report numbers w/o amortization - a la the cash earnings of the internet companies - without this step NT would be considered unprofitable in 00 as well by old line accounting sticklers. LU will join them with this quarter, adding about 2 cents to their quarterly #'s. 2. NT's reported top-line growth for 99 is very misleading. NT added Bay as a purchase as of Sept. 98. So NT's Q1 and Q2 results are being compared to an NT w/o Bay, and Q3 is compared to a Q398 where Bay contributed only one month to revenues. Add Bay to the YoY compares and NT grew only 15% in 1999 - albeit accelerating through the year. Even including the Dec99 disappointment, LU grew revenues nearly 19% in CY99. 3. Remember LU's 4th Q is September - comparing sales growth by isolating NT's 4th quarter vs. LU's 1st is misleading. It is best to use a full years #'s. NT did, in fact grow its wide area switching faster than LU in 4Q, but off a smaller base. Over the full year, LU grew much faster. The same is true of wireless. For CY99 NT grew wireless about 13%, which is about 800bp less than industry growth, while LU grew at 30% for the year. 4. Access is growing faster for NT - about 80% YoY growth in 99 vs. 50% growth for LU. NT still has a smaller base than LU but is gaining in this hot market. 5. Central Office switching was 22.5% of NT revenues in 99 and was dead flat YoY. This year NT is guiding for a slight decline. CO switching was 19% of LU revenue in 99 and grew about 12% with guidance for similar performance in 00. 6. Both companies' enterprise businesses were poor performers in 99. NT's enterprise sales were 24.6% of total and were down about 10% once you account for Bay. LU's enterprise business was 22.2% of total and grew 5% in 99. 7. LU has businesses that NT doesn't - professional services, semiconductors, optical fiber. These businesses are in a strong up-cycle and are contributers to growth. 8. NT's 99 optical growth was about twice LU's - 80% to 40%. Optical equipment was about 20% of NT sales in 99 vs. less than 13% of LU.