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To: pat mudge who wrote (2803)	9/16/2000 8:34:44 AM
From: Kenneth E. Phillipps	Read Replies (1) \| Respond to of 3951

Isn't it an effort to fool the public sector into giving the spin-off a high valuation so they can use the shares as collateral --- all to benefit the mother company? Hi Pat. On the Nortel thread, we are asking some of the same questions. This spinoff, as most spinoffs, seems to be an attempt to get increased value from the components business and use that increased value to benefit the systems integration business. Nortel is spending a lot of money right now to increase its component business so by next summer, they should have capacity to sell to new customers? Who will those customers be if they are not selling to their direct competitors? That is question we are asking and don't know the answer. Of course, by next summer, the IPO market may not be the same especially if some of the new startups fail.

To: pat mudge who wrote (2803)	9/16/2000 11:02:12 AM
From: SJS	Respond to of 3951

Pat, You're raising very good points. A recent spinoff which, on the surface, seems like this one could be/wants to be similiar (or then again, maybe not) is the METHA (Methode Electronics) and STLW (Stratos Lightwave) spinoff. STLW still sells to METHA, is their largest customer, etc. But is now a free standing optical components company. I participated in their IPO, and it's done very well since that time. I don't know how you can NOT sell to your parents competitors if you're spun from the parent into a separate company. You're goal as a separate company is to grow, and you can't do that without finding new markets, and new customers, some of which will undoubtedly compete with "papa/mama". I get the sense that this will have to be discussed much more and I guess we're all due some enlightenment down the road. I am confident NT will address it satifactorily. I own shares there, too. Steve

To: pat mudge who wrote (2803)	9/16/2000 11:58:45 AM
From: bafi403	Read Replies (1) \| Respond to of 3951

Spinoffs make sense when a firm has heterogeneous business units, (that is, divisions with wide disparity in fundamental traits). The underlying assumptions are, (1), that it is difficult to manage a large diverse conglomerate, and, (2), that the market is not very efficient at valuing "conglomerates", primarily because the 10Ks of conglomerates do not do a good job of giving you all the details of the fundamental traits of divisions. Within the backdrop of modern-day contracting and a tight labour market, spinoffs also allow a firm to be more efficient in designing compensation contracts for management, (stock options that reflect the prospects of the relevant division, etc.) Therefore, "complete" spinoffs make a lot of sense to shareholders, (by "complete" I mean the division is first valued by the market and new shareholders in a partial IPO, and then all the remaining shares are distributed to old shareholders: that is, the division is then freely and publicly traded as a new firm). However, the difficult psychological hurdle for current management to cross is the fact that it has to give up control of the division. There are two ways of keeping control: (1) Do a spinoff and keep majority ownership, (that is, do not distribute the shares to the shareholders) or (2) Issue tracking stock instead of doing the spinoff. Roth appears to be talking about using the first technique. Needless to say, one needs to be skeptical of incomplete spinoffs. The only circumstance, that I can think of, under which incomplete spinoffs might make sense is if the market believes that the absence of Roth's management-presence would cause the division to fall apart.

To: pat mudge who wrote (2803)	9/19/2000 1:02:05 PM
From: DukeCrow	Respond to of 3951

First, I look at it as more of a tracker than a spin-off. This is because Nortel still retains complete control over the unit, and the unit will not become truly independent. It is simply a piece of financial engineering which allows for acquisitions without causing dilution to Nortel proper. Looking at this as more of a tracking stock it becomes obvious what the downside is...no real shareholder rights and/or powers. Nortel will do with the components business what is best for Nortel, regardless of whether it is better or worse for holders of the components biz tracker. I fully expect Nortel to retain control of the components business as long as a supply constrained environment exists. However, as soon as overcapacity in component supply begins to show itself (I'm not going to try to predict when that will happen) I think Roth will finally complete the spin-off because the components business will no longer be strategic. Ali