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

To: William Hunt who wrote (9891)	2/17/2001 2:46:00 PM
From: A.L. Reagan	Read Replies (1) \| Respond to of 14638

Bill: Someone will have to build out the telecomunications industry in the US [snip] any ideas on the fiber optic plays that you put money into ? I agree in the long-run, and I think almost all agree that it ain't gonna be circuit switched. The reason why I sold 70% of my NT was belief that things will get worse b/4 they get better. The guidance on the overall broadly defined optics business didn't strike me as too bad in a recession year; wireless as you said we pretty much knew about; the big surprise was that the 35-40% of NT's sales mix that was the circuit-switched equipment biz has basically fallen off a cliff and is not likely to return, EVER. So, doing the math, and looking at the number of shares o/s, it doesn't look likely that optics and wireless, at current rates, will adequately compensate for the evaporation of the legacy business in NT. There's sort of a "legacy" component to the optics business as well. Tough to quantify in sales, but not insignificant. As we can see from this thread and press reports, people are obsessed with Nortel's optics business, which I don't see as the real long-term problem here. Granted, there's a major slowdown in carrier spending, which has been foreseen for quite some time by anybody who can read a blance sheet. With 20/20 hindsight, it's pretty logical to figure that if the rate of growth of carrier spending on optical transport decreases from say 40% to 10%, that the absolute spending on legacy systems will be cut to the bone. And it's pretty logical to figure that enterprises aren't lining up to buy a new PBX. (Ain't hindsight wonderful.) So, when the entire optic sector got trashed along with NT on Friday, it occured to me, given NT's sales mix, that I might be better off taking money out of NT and moving it elsewhere. It mainly ended up in JDSU on the theory that carriers will focus on lighting existing fiber in 2001, which should be good for amplifiers, pump lasers, and those sorts of widgets. I think JDSU at $36 is a better investment for 2001 than NT at $20. (When I get my next brilliant flash of 20/20 hindsight, it will probably turn out that cash trumps either of NT or JDSU.) I did not fall for GLW, which I think is a fine company, but I don't think the next 12 months will see anywhere near the level of new fiber in the ground or underwater that we had the last 12. On the same theory that carriers will focus on utilizing existing fiber assets, I steered clear of the newer systems houses like ONIS and CIEN (which may be a quarter ahead of its comeuppance given current expectations.) Again, I don't see any insurmountable problems with NT's optics business versus other houses, and where I see the specific NT problem is (a) legacy biz falling off far faster than anyone anticipated (and not coming back ever); and (b) multi-year delays in wireless infra deployments (if most of the 3G UMTS stuff doesn't see the light of day until 2003-2004). BWTFDIK, ALR