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

To: telecomguy who wrote (14559)	4/27/2000 11:23:00 AM
From: Mighty Mizzou	Read Replies (1) \| Respond to of 21876

You sound panicky. I dont blame you. LU is making ALL the right moves. eom

To: telecomguy who wrote (14559)	4/27/2000 1:18:00 PM
From: Mr.Fun	Read Replies (5) \| Respond to of 21876

TG, As usual your conclusions are superficial. Yes, NT had an outstanding quarter, and we bought yesterday and more today. However, your assertion that there is compelling evidence that LU is mismanaged and that is losing battles in the field is not supported by the most recent evidence. Points: 1. NT's quarter included a shift in the way they account for joint ventures in France and Germany. This change in accounting policy added $250M in revenues to the quarter, that should not be considered in assessing growth. Furthermore, $70M in revenue came from Clarify, which was not included in the previous year's numbers due to purchase accounting. Take these revenues out of 1Q-00 (or add $210 and $50 to Q1-99). So apples to apples growth was about 40%, not 48%. Still a great number. 2. Next, consider that in March 1999, NT had a hideous quarter. Revenue growth appeared okay only because NT had purchased Bay in Sept. 98. If you add Bay's March 98 revenues to the compare (or subtract Bay from March 99) you find that YoY growth was only 5.5%, with declining sales in Wireless. This is what is known amongst professional investors as "an easy compare" 3. Now lets consider LU's quarter. 18% YoY growth vs. a year ago quarter where growth was 35%. This is known as "a difficult compare". To borrow a disingenuous trick from the bear side, let's subtract the "$800M in deferred revenue that was supposed to have appeared in December 98". That gives us 31% YoY growth for the quarter. 4. Now lets consider the full effect of the "easy" and "difficult" compares. Looking back to March 1998 - NT has averaged 22% growth over that two year period, while LU has averaged 26% growth over the same time period. 5. Stepping back to the quarter at hand, I posit that the ONLY place where NT is beating LU (and here it is beating LU like a drum) is in selling 10Gbps optical TDM to new build carriers. LU is trying to accelerate from a standing start, while NT has 12 months of momentum behind it. The demand for 10Gbps optical is so strong that NT AND LU will be able to sell everything they can build. This quarter's 25% sequential growth in optical (150% YoY) is an indication that NT is adding capacity quickly indeed. NT is very likely to meet or exceed that $10B target. LU will likely top $7B, a nice 60%+ growth rate, but still losing ground to NT. The upside surprise beyond the expected 100% YoY growth in optical accounted for about $500m of NT's quarterly performance. BTW did you listen to NT's conference call - when asked if NT could displace LU as optical vendor at AT&T, Roth said that they had all the business they could handle with their existing customers. So much for your theory that LU's optical customers were deserting in droves for NT. 6. In almost every other category, LU outgrew NT. LU's carrier data networking, which includes access and packet switching/routing, grew 80% YoY vs. <50% growth at NT. LU's wireless business grew more than 50% YoY vs. a very difficult compare, NT's did less than 50% vs. an extraordinarily easy compare amid reports that it discounted heavily to win contracts it would have otherwise lost. Enterprise was up a tick at LU and down 5% at NT. This quarter NT had better CO switch sales growth than LU, again amidst reports that it was offering big discounts to get the business. 7. NT's losing strategic ground in wireless, despite protests to the contrary. Ericsson and LU are providing NTT DoCoMo's 3G W-CDMA network and NOK is providing Japan Telecom's. NT is not a part of any major W-CDMA trial - even Motorola is doing better than that. BTW, next year wireless growth will accelerate while optical decelerates. 8. It is entirely likely that NT pulled alot of business forward to make this quarter as big as possible in front of the BCE share spin-out. Expect serious deceleration toward the second half, as compares and competition get tougher. BTW the street does not like deceleration. 9. NT has all the momentum in the world right now, and will probably get back to the $140-$150 level by July - after which I will sell everything we've got. NT is a good company with a hot product - but at heart, its the same company that missed the Q4 in 1998. 10. In contrast, LU has more to prove, but alot of room to run. It is alot like NT this time last year (can you remember that far back?).