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

To: Georgeb who wrote (16855)	10/21/2000 9:05:14 AM
From: rrufff	Respond to of 21876

Not a bad idea. Question with LU is timing. Is all the bad news out? They've mishandled everything else. Will CEO bumble the next week? OTOH - the bar is so low any positive surprise could send this soaring including the best one of all, i.e. CEO resignation. That article showing they didn't know the shortfall until 2 weeks before doesn't say much for the vaunted CFO. That said, I've got a small stake and have thought of adding here but not convinced the total incompetence is out yet. BTW, those calls are quoted at 5 1/2 - 5 3/4.

To: Georgeb who wrote (16855)	10/21/2000 11:46:20 PM
From: Joe S Pack	Respond to of 21876

A snapshot of vendor financing. LU, NT and CSCO all have their own share. From RBull. -Nat By: Bubba-San Saturday, 21 Oct 2000 at 10:42 PM EDT Post # of 4568 Another vendor financing article from North of the border. ------------------- Baby Bell failures could loom large for telecom giants Nortel says it has safeguards to protect it Bert Hill The Ottawa Citizen, with files from Citizen News Services The recent failure of several small U.S. telephone companies is creating troubles for Lucent Technologies that could spread to other players, including Nortel Networks. The reason is that major telecommunication companies have long won big contracts for new equipment by financing the deals. But companies that are both bankers and technology developers can get hit even harder if deals go bad when market conditions change. Lucent warned this month that earnings would be depressed, in part, by the need to increase reserves to cover bad loans. Xerox Corp. disappointed the market with sharply lower earnings last week, in part because of soured so-called vendor financing. Nortel said that it's internal financial controls will protect it. "Lucent's troubles are particular to that company," said Nortel spokesman Jeff Ferry. "We have been doing vendor financing for many years and we make conservative provisions (to protect) against bad debts." In addition, he said Nortel sells the debts quickly into larger credit markets and that provides additional safeguards. Still, Nortel has already been involved as a creditor in two troubled deals that have come to light. In addition, two deals this week show how the financing works -- and can go astray. In one deal Nortel agreed to finance 50 per cent of a $1-billion equipment purchase byAerie Networks of Denver. The start-up wants to build a 36,000-kilometre fibre-optic network linking major U.S. cities. In the second deal involving a troubled small carrier, Nortel refused to grant more assistance to Universal Broadband Networks. It already owes Nortel $12.8 million U.S. and possibly more. Universal of Irvine, California said it was surprised at the decision and warned investors that the future of the company is in doubt. "(Tuesday) morning we were informed that Nortel's credit committee had decided not to extend any additional funding or to finance additional equipment for the company. Unfortunately, market conditions beyond our control dictate these circumstances." After years of explosive growth, the competitive carrier business in the U.S. is clearly consolidating and weaker players are dying or being absorbed. For example, Nortel has $150 million invested in Nettel Communications, a Washington, D.C., company that filedfor bankruptcy protection earlier this month. The Washington Post reported that Nortel was among the major creditors in Nettel, which listed $133.5 million in assets and $155.7 million in debts. A Nortel affiliate provided $45 million for equipment purchased by GST Telecommunications, a Vancouver, Washington, carrier that hit the wall earlier this year. GST assets were subsequently acquired by Time Warner Telecom of Denver for $690 million. Paul Sagawa, an analyst with Sanford Bernstein, first highlighted the problem last month when he warned that many small telephone companies simply can't afford to keep up buying new equipment at the current rate. He downgraded his recommendation on Nortel and Cisco Systems. He said few of the scores of new phone companies are generating sufficient cash to pay borrowing costs on new equipment, regardless of their desires to keep up with the competition. So far, the issue of financing customers is a small part of the problems facing Lucent and other players. Nortel should be in much better shape to get over any financing bumps. The extraordinary growth of Nortel's fibre-optic product sales and profit has been largely at the expense of Lucent, the previous market leader. Cisco Systems has also had its trouble with hard-pressed customers. American MetroComm Corp. filed for bankruptcy in August, leaving $53 million owed to Cisco in doubt. Lucent is indirectly owed $26 million. Ciena Corp., a Nortel competitor, plans to write off $28.2 million in accounts owed by bankrupt customers. Lucent is selling securities backed by customer loans worth $1.1 billion into money markets. Such transfers allow companies to clean up their balance sheets. According to a September article in Barrons, Lucent tried in June to sell some of the $2 billion in vendor financing it had extended to Winstar Communications for less than 90 cents on the dollar to junk-bond market. ----------- from: ottawacitizen.com -----------