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

To: A.L. Reagan who wrote (9729)	2/15/2001 7:18:01 PM
From: William Hunt	Read Replies (2) \| Respond to of 14638

AL --- A snapshot :Ciena, Nortel Point to Triumph of Optical Networking By Scott Moritz Senior Writer 2/15/01 7:01 PM ET SAN FRANCISCO -- The future begins now for networking companies, which is bad for Nortel (NT:NYSE - news) and good for Ciena (CIEN:Nasdaq - news), judging by Thursday's action. Its little-discussed old-school phone business appeared Thursday to have been Nortel's undoing, which could mean further bad tidings for the big phone gear makers and good cheer for Ciena and its brethren, such as Sycamore (SCMR:Nasdaq - news) and Corvis (CORV:Nasdaq - news). Meanwhile, Ciena's bullish comments had investors rushing headlong into the networking sector throughout Thursday. The thread tying the events together is the so-called optical revolution in networking equipment. Ciena is the leader among companies focusing purely on optical networking, a leading-edge protocol that uses lightwaves to haul information over fiber optic pathways, and has gained significant headway in sales to optical buyers. Nortel, meanwhile, sells optical gear along with traditional telephone gear, the electronic, voice-based equipment that networks have sought to replace with optical systems that carry voice and data traffic on the same pathway. And weakness in that so-called legacy business has punished Nortel the most in its current quarter, it appears. Bookends Ciena kicked Thursday off with a strong earnings report that sparked a rally across the networking sector. Despite the slouching economy and the cash-hoarding quest-for-survival among many phone and Net service providers, Ciena managed to turn on the steam in sales and profits for its first quarter while pointing to even better times ahead. Its stock soared $12.19, or 16%, to $89. Nortel, by contrast, shocked investors by forecasting a lingering industrywide slowdown and an accompanying deep shortfall in earnings and revenue growth. After hours, its shares plunged 22%, leading to a pullback in the networkers that had run up during the day. "It looks like the theory is starting to bear out -- the old, staid companies like Nortel and Lucent (LU:NYSE - news) are having troubles and turning into the IBMs of the networking industry," says Tim Kristiansen, a money manager with Carnegie Asset Management of Copenhagen, Denmark. "Then you have newer companies like Ciena winning away the business." He owns no Ciena or Nortel, but does own Cisco (CSCO:Nasdaq - news). Mirage Nortel had convinced itself that growth would continue north of 30% annually, and that any economic slowdown would dissipate in a second-half recovery. But the company's comments in a postclose conference call struck a blow at the viability of the bounceback scenario recently favored by the likes of Cisco and JDS Uniphase (JDSU:Nasdaq - news). CEO John Roth was asked why the company, on three separate occasions, stuck with its optimistic guidance even as evidence of a slowdown mounted. Roth said Nortel had "good visibility on the carriers' budgets," but one-by-one the big telecom carriers began reviewing each dollar they were going to spend. "This is a process we'd never seen before," he said on the conference call, which ironically suffered transmission difficulties due presumably to overloaded phone circuits. Roth conceded that the overall climate has changed considerably. The limp U.S. economy combined with the heavy debts and limited cash held by phone companies combined to dramatically slow industry equipment spending. At least that's how Nortel experienced it. "The carriers are nervous, they want to make sure every dollar they spend generates revenue this year," Roth said. "I don't see any relief from that. By the end of January we thought they would resume their normal business practice." Sunny Side Up Meanwhile, all was sweetness and light in Ciena's camp. Ciena's president and chief operating officer, Gary Smith, said in an interview after the company's conference call that the ill winds that blow across the sector are actually at Ciena's back. "We've long talked about a shift from legacy [old electronic-based phone gear] to new optical data networks," said Smith. "And while we certainly aren't immune from the impact" of larger economic and network equipment spending slowdowns, "because of our product portfolio, we are beneficiaries, in a perverse way," of that shift in spending. Speaking to a related issue, Nortel Chief Operating Officer Clarence Chandran was asked if Ciena was taking optical market share away from Nortel. Chandran said no. But investors will surely draw their own conclusions. BEST WISHES BILL PS ---Find it hard that Ciena would have that kind of impact . This kind of miss is more an industry wide issue and the fact Greenspan is in denial that we are in a ression which is getting worse . The number of good paying jobs going out the window while he is in denial is crazy . The funny thing about the interest rate hikes were to counterbalance the big spike up in energy . Oil is still around thirty dollars a barrel ---did not work . The job for NT is to determine how much of the legacy business to let go and downsize according to the future of optical which is where the telecomunication busines is headed . We will have to base for about four to six months which will allow them time to re-organize and hopefully rebuid some credibility and bring the 40G and 80G systems to market . Will buy some more and cost average down and hope Greenspan realizes what he is doing to his one true ally in the inflation fight ---technology . Right now that is not a warm and fuzzy feeling depending upon him. BEST WISHES BILL PS Why did we pay 3 billion for an optical laser pump plant if business is bad ?

To: A.L. Reagan who wrote (9729)	2/15/2001 7:18:24 PM
From: Clay Takaya	Read Replies (2) \| Respond to of 14638

A.L., The legacy circuit switching business is certainly horrible, but why do you think that wireless is a problem for NT? I haven't heard anything about this. Check out this link: lightreading.com I haven't followed NT very closely over the last year, but I know they make a lot of SONET gear. If CIEN's premise is correct, then carriers are moving away from SONET because of the cost. This jibes well with Roth's statement that the carriers are reviewing every penny spent and trying to optimize their dollars. Read the article carefully as it makes the case that NT's troubles may be in the optical space. Every day it seems like the future arrives a step earlier than expected. If so, then wireless should be a huge winner for NT as I believe that this is a business that telecom companies can make good money in and will want to purchase equipment for.