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

To: Kenneth E. Phillipps who wrote (9858)	2/16/2001 5:47:39 PM
From: KM	Read Replies (2) \| Respond to of 14638

And here's another one. BTW, covered my short on this today, but it may be early. Reading the Insider Tea Leaves at Nortel By Jay Somaney 2/16/01 4:35 PM ET Readers have been asking me the one question on everyone's mind today: Is Nortel Networks (NT:NYSE - news - boards) a good bet after its 33% haircut? My answer? To run as far away as you can. Despite the shellacking Nortel is receiving in the markets today, the company's problems have just begun. Of course, you might get a dead cat bounce as so-called bargain hunters swoop, however the extent of the miss tells me that the good ship Nortel is heading for an iceberg at full steam. She could be another Lucent in the making -- without the accounting irregularities, of course. In the conference call yesterday you could almost sense the beads of perspiration on John Roth's face as he tried to explain away what in anyone's view has to be an absolute disaster. Nortel, in a shocking announcement after the market closed yesterday, announced that it expected to lose 4 cents per share for the first quarter of 2001. In its guidance, just a little over three weeks ago, Nortel had expected earnings of 16 cents per share. In addition, the company now expects revenue for the March quarter to come in at approximately $6.3 billion, down almost 23% from its previously expected $8.1 billion. The company is now valued at 22 times estimated 2001 earnings, and a little under two times estimated 2001 revenues. In order to streamline costs with the reduced demand, Nortel also announced that it intended to decrease its headcount by a total of 10,000 employees worldwide by the end of 2001. Nortel's U.S headquarters are in Richardson, Texas, which happens to be only six miles or so from where I live, in Plano. Nortel has around 10,000 employees in the Richardson Telecom corridor. Consequently, I have a lot of close friends who work at Nortel. Over golf games and at dinners, the common theme discussed by these folks was that Nortel had seriously miscalculated demand at the beginning of the year. Many of them were selling their stocks going into the end of January and banking the proceeds. To most of them, a shortfall was more than anticipated but what was not anticipated was the extent of the shortfall. Having said that, not one of them said to me that they would be buying at these levels. My money is with them. If they are not buying, neither am I. P.S. Wonder if Greenspan is reading the headlines?

To: Kenneth E. Phillipps who wrote (9858)	2/16/2001 6:13:37 PM
From: William Hunt	Read Replies (4) \| Respond to of 14638

Optical Bait and Switch? Missed Product Cycle Costs Nortel Dearly By Scott Moritz Senior Writer 2/16/01 5:44 PM ET Having missed out on a key product shift, mighty Nortel Networks (NT:NYSE - news) is now stuck pushing air conditioners during the telecom industry's long, hard winter, observers say. As shortfall warnings from Nortel and its suppliers JDS Uniphase (JDSU:Nasdaq - news) and Corning (GLW:NYSE - news) punished the networking sector Friday, some signs pointed to a dramatic shift in optical networking product demand as the culprit. Nortel's failure to heed this shift could leave it in the same straits as rival Lucent Technologies (LU:NYSE - news), which missed an earlier product cycle, ceding key ground to Nortel and leading the equipment maker into its current morass. Related Stories Communications Chip Stocks Humbled by Nortel Warning Contract Manufacturers and Chip Stocks Feel Nortel's Pain Analysts Pan Nortel's Sad Song Ciena Rides Optical Networking Highway Unhindered, Unlike Nortel Among the patterns investors and industry observers saw emerging from Friday's networking meltdown was a rather glaring void in Nortel's nearly comprehensive product line: The company lacks an optical switch. Save Money With cash in short supply, phone and Net services companies have slashed jobs and trimmed costs, as many are seeking to preserve liquidity and keep creditors at bay. These equipment buyers, who sit atop the sector's cash-supply pyramid, have accordingly begun to shift their purchases away from gear that expands their networks to gear that operates new networks. This trend was expected to play out incrementally over the coming years, but some analysts say cash constraints have hastened that move. And Nortel, with its Xros optical switch estimated to be still a couple quarters away from release, isn't exactly cashing in on the changing product cycle. "In 2000, a lot of carrier spending went to network buildout and the addition of a lot of transport equipment," said a Wall Street analyst who currently has no ratings on these stocks and asked not to be identified. "But now they are getting far more interested in ways to operate and optimize those networks." His firm has done no underwriting for Nortel. Passing the Baton Last year, Nortel had surpassed Lucent as the dominant supplier of the world's optical transport gear. These are laser-based fiber optic boxes that shoot lightwaves through networks at speeds of 100 billion bits per second. These transport boxes are affectionately called OC-192 or 10-gig devices. As a possible sign that there is less demand for 10-gig equipment, TheStreet.com found some of these once-coveted parts in the repossessed equipment market. Ciena, which also makes transport products, has the market lead in optical switches and said Thursday that it expects its switch sales to exceed 10% of its sales this year. The Linthicum, Md.-based all-optical shop lists 11 customers for its CoreDirector switch, with big-spender Level 3 (LVLT:Nasdaq - news) the most recent addition to the list. Ciena's president and chief operating officer, Gary Smith, said the shifting winds in the industry are moving firmly at his company's back. Some analysts agreed. "Ciena and Sycamore are in pretty good shape in terms of what they offer and where the market is headed," said the unnamed Wall Street analyst. Nortel's CEO John Roth continued to deny that Ciena was swiping market share from his company. But to support his point, Nortel held up market-share figures for the transport products. Nortel cannot gauge its optical switch market with no optical switch to offer. A Nortel spokesman couldn't resist a parting shot at a rival upstart. "It's easy for [Ciena] to show growth; they have a smaller base," the spokesman said. "They are very small, their revenues are $1 billion a year ... we make that in two weeks." Taking a Managerial Role Both Ciena and Sycamore (SCMR:Nasdaq - news), along with closely held Tellium, have developed optical switches that are run by sophisticated software that serves as the brains or operating system of a network. These switches have demonstrated an ability to manage network traffic routes and, if you believe the developers, effectively cut network operating costs by as much as 90%. The cost savings presumably come from the elimination of numerous electronic boxes and attendant devices. Optical switch fans also blow the revenue horn, saying the smarter boxes can speed up a service provider's response time, allowing it to sell capacity in lucrative short-term blocks as opposed to the traditional long lead times and long bandwidth contracts. To be sure, the nation's sagging economy may play a larger hand in the equipment spending shifts and slowdowns. And in that sense even Ciena, which was hit less than its networking brethren Friday, remains very vulnerable. "Ciena and Sycamore are trying to lead the way, but the question is whether the carriers are going to be able to buy anything at all," says Bill Trent, a money manager with New Jersey's employee retirement funds. "The idea that they had to keep spending to stay ahead of their competitors has gone away." "Now," says Trent, who has positions in Ciena, Nortel, Sycamore and Lucent, "the carriers are probably not going to spend until they see the monetary advantage." BEST WISHES BILL