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

To: telecomguy who wrote (15370)	7/12/2000 4:16:16 PM
From: Mr.Fun	Read Replies (1) \| Respond to of 21876

LU is what it is. It is large, with alot of fat left in middle management. It has very poor information systems and thus poor visability. It is clumsy in its relations with Wall Street. It takes longer than it should to gather the information deemed necessary to make a decision (although I would not call it indecisive). On the flip side, it has a considerable depth of talented people. It has exceptional technical resources. It has excellent products in almost every important growth category. It has a solid sales force and strong customer relationships. It is selling into an environment of accelerating carrier spending. I find Telecomguy's John Roth worship comical, as most of the street wanted his head in January 1999. What a difference a year's monopoly in 10G optical transmission gear can make. We bet big time on NT in early 99. We sold out too early, but bought back in when the stock revisited the $50s. This quarter will be big and the stock will set new highs, but there will be a top as the compares get more difficult toward the end of the year. I believe the long-term prospects for LU and NT are fairly similar. NT is a little stronger in sales and marketing (not to mention IR and PR), LU is a little stronger in engineering and product breadth (as well as better focus on core markets post AVAYA spin). Both companies are way too fat in middle management (look at those NT operating margins - Yuk). McGinn is a good CEO who is not leaving anytime soon. If in 1996, LU had focused its resources on developing 10G optical transmission products and NT had not, LU would be the dominant optical equipment provider. Remember that LU had its best customer telling it not to bother and top management was a little preoccupied with the IPO. LU is losing people due to the allure of start-ups (helped along by its stagnant stock price and frustration with bureaucracy) but then again, so are CSCO and NT. The flight of talent out of NT and Bay was unbelievable in 1998 and early 1999 - poor stock performance combined with Canadian taxes and a hot IPO market - but that hasn't stopped the company from posting accelerating results. LU shareholders have alot to look forward to: 1. LU can (and I believe will) deliver significant upside surprise to consensus expectations. CSCO and NT will have great difficulty topping heightened expectations. 2. The spin-offs of Avaya and possibly ME will make LU a smaller, more focused company, likely to be more maneuverable and free from the drag of poor enterprise results. 3. After the Avaya spin, LU will address a market growing at better than 25% without the drag of tepid enterprise spending. 4. A spin-off of ME will have further benefits - on its own, ME will win more business from equipment houses that compete with LU. Furthermore, the 20% of its sales that are now captive, that's revenue that will show on the top-line as a separate company. I believe LU shares will show better appreciation from here to the end of the year than either CSCO or NT. BTW check out NOK at these prices.