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

To: Warren Gates who wrote (7649)	10/25/2000 7:07:33 PM
From: pat mudge	Respond to of 14638

I don't know what these analysts said publicly, but for what it's worth, here's their comments in-house: Analyst comments on NT: 1) SBCowen: <<<< Summary and Investment Opinion: Yesterday, Nortel announced its Q3 results, meeting expectations, but reported surprisingly, sequentially down optical revenue. Nortel cited 1) excess inventory of systems at carrier customers from several quarters of “over ordering” in a component constrained and long lead-time environment, and 2) a shortage of installation engineers for the decline. NT remains adamant that demand remains strong and has provided definitive guidance for Q4:00 and F:01. While other parts of the company’s business are showing the progress that we had expected to see per our original investment thesis, for the near-term, we expect the stock to be weakened by the concern in optical. We are maintaining our Strong Buy rating on the stock given that the outlook remains in line with previous guidance and our checks with service providers continue to support strong growth for optical and IP. However, we acknowledge monitoring progress in coming months is critical to ensure company meets its guidance. Given that our $117 target price reflected near flawless execution, we believe $85, implying a PE-G multiple of 2.5x and a P/S multiple of 6.6x, is more realistic in the near-term. A clip from Cowen’s “Tech Radar:” Oct 25, 2000 NT (Strong Buy, $63) Q3 Misses Optical Targets, But Confirms Future Guidance _ Revs of $7.31B was slightly below our est of $7.34B. EPS of $0.18 was in-line with our est, $0.01 more than consensus. _ Optical revenue declined sequentially due to customers working off excess inventory built up from long lead times and shortage of installation engineers. _ Encouraging growth in wireless, local Internet and enterprise. NT confirmed low-40% rev and EPS growth for 2000; 30-35% for 2001. New $85 PT (PEG of 2.5x to 2001 estimated EPS and growth) reflects concern in optical. – Armacost . . . JDSU (Strong Buy, $95), SDLI (NR, $316) – Checks w/ JDSU indicate Q1 coming in line, reporting tomorrow. SDLI reported very strong results last week; NT is a 10-15% customer. And from their “Morning Call:” October 25, 2000 New Nortel Networks – Strong Buy Misses optical targets; lowering price target to $85 from $117. Q3 rev of $7.31B (+42%) was slightly below our mid-Q increased est of $7.34B. EPS of $0.18 (vs. $0.11) was in line with our est, $0.01 more than consensus. Optical revenue declined sequentially due to customers working off excess inventory built up from long lead times and shortage of installation engineers. Encouraging growth in other areas— wireless, local Internet and enterprise. Co confirmed low-40% rev and EPS growth guidance for 2000; 30-35% for 2001. New price target reflects concern in optical. Optical Networking Don’t think Nortel news signals a macro downturn in optical demand. Strong Buy NT seeing double ordering among carriers and lack of installers, issues that could linger a Q or 2. Optical group could take a hit on this news, but don’t recommend buying on weakness until we get better information. Will be checking in with suppliers and carriers today. Strong Buy JDS Uniphase (which has 30-35% of sales from NT and Buy-rated Lucent) reports Q3 tomorrow after close; expect it to meet our EPS est of $0.16 on $753MME in rev. JDSU well-positioned long-term. We are more optimistic about Strong Buy Ciena (vulnerable because of its high valuation); NT had strong European sales, which is key for Ciena. In addition, metro sales ramping quickly; Core Director optical cross connect product very strong. 2) CSFB: Investment Summary Nortel Networks delivered financial results that were disappointing relative to our expectations for the company’s September quarter 2000. Nortel’s revenue line at $7.3 billion was below our $7.5 billion projection and earnings per share after ad-justing for a lower than expected tax rate was in line with our $0.17 forecast. We believe the primary issue leading to the lower sales figure was an inventory build at several large optical systems customers that led to a near-term slow down in re-order rates. To a lesser degree, the installation constraints in deploying opti-cal systems at certain service providers cited by management on the conference call contributed to the shortfall. We are adjusting our fourth quarter 2000 sales estimate for Nortel to $8.45 billion from $8.90 billion to reflect any lingering effects from the issues cited above and we are maintaining our earnings per share esti-mate of $0.26. Our revised revenue expectation is consistent with the low 40% sales guidance (40.5%) management provided for the full year of 2000. For 2001, we are maintaining our $1.00 earnings per share forecast and we are fore-casting sales of $39.4 billion. There were several encouraging factors present in the company’s third quarter performance. On an absolute basis, revenues jumped 42% year over year with strength in wireless networks, traditional core switching and broadband access systems. Nortel recorded a positive book-to-bill that we believe was in the range of 1.02 to 1.08. The company delivered a gross profit margin of 44% above our 43.3% view reflecting improving gross profit margins in both the service provider and enterprise segments of the company’s business. In addition, vendor financing commitments and advances remain in line and are concentrated among 15 strategic customers as opposed to an array of second tier CLECs that have impacted the company’s competitors. In fact, Nortel’s CLEC exposure from a financing perspective is at less than 10% of the company’s commitments. The balance sheet was generally in line. The sequential increase in accounts receivable DSOs is on target with seasonal trends and we believe is not a significant cause for concern.. >>>>>>>>>>>>>> Pat

To: Warren Gates who wrote (7649)	10/25/2000 8:58:31 PM
From: Bosco	Read Replies (1) \| Respond to of 14638

Hi Warren - very astute observation [re: Mr Roth's Jag and Mr Chamber's Lexus :)!] I ve no problem if they pedal to the metal, so long as they reserve the supercharger for the time of needs :) That reminds me of the 1st time I drove to Canada via the Vermont checkpoint. After I crossed into the country, I saw the road sign stating "90" So, being a law abiding visitor that I was, I stepped on it in some secondary roads, but of course, the locals still blew by me. Not until I saw the 1st french road sign did it dawn on me I came from a backward country where we were still using "mile" instead of "kilometer!" best, Bosco