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Technology Stocks : SDLI - JDSU transition -- Ignore unavailable to you. Want to Upgrade?

To: Stoctrash who wrote (680)	3/11/2001 9:06:26 PM
From: puborectalis	Respond to of 3294

Telecoms Conrad de Aenlle Saturday, March 10, 2001 When analysts say they are "long-term believers in the growth opportunities" inherent in a business they follow, it usually heralds a torrent of negative opinion about the sector's short-term prospects. So it is with Merrill Lynch Co., in a report on makers of telecommunications equipment. In the report, the Merrill analysts Adnaan Ahmad and Alec Shutze lowered their estimates of mobile handset sales for the next two years and with it estimates for profits and margins at some large, European makers of mobile phones and related equipment: Nokia Oyj, LM Ericsson AB, Alcatel SA and Marconi PLC. The analysts said they expected handset sales to rise by 16 percent this year and 24 percent in 2002, much less than previous estimates. The main reasons for the revised outlook were that the rollout of mobile data services is being delayed, obviating the need for consumers to buy new phones, and the fact that so many countries are nearing the saturation point on phone ownership (the possibility of which apparently failed to occur to many analysts and investors as growth in the market was soaring a couple of years ago, along with share prices of equipment makers). As dour as their near-term outlook for the industry is, Mr. Ahmad and Mr. Shutze are not as gloomy about the companies' stocks. The tech washout has already carried them to their lowest valuations in three years, so much of the bad news, present and future, is already factored in. In fact, they advised, a trough may be close. "Given the dramatic share price declines seen in nearly every company in this sector, we believe that we are approaching the bottom in terms of valuation," they wrote, "and that long-term investors should soon be looking at entry points. We believe that downside risk is limited to a further 10 percent to 15 percent in our new conservative scenario." The only stock that Merrill downgraded was the biggest - Nokia - from buy to accumulate. In a separate long-term rating, the stock is still a buy. "We are concerned that Nokia will not meet its internal revenue growth objectives of 30 percent to 35 percent in the first half of 2001, due to a soft handset market," the report said, "and that Nokia will find it difficult to reach 20 percent margins" in its mobile-phone business, "given likely intense pricing pressure." Accumulate ratings were maintained on Ericsson and Alcatel, two stocks that were downgraded in January, as was the neutral opinion on Marconi. The analysts predicted the "massive de-rating of our sector is coming to an end but that the share prices could still be vulnerable to likely future profit warnings." That de-rating was indeed massive. Nokia has lost more than half its value over the past year, and now trades at about 26 times its expected earnings for the coming year. A year ago, Nokia's price-to-earnings ratio was more than 100 times its trailing earnings. Ericsson's B shares have lost 62 percent and Marconi is down 49 percent. Alcatel is down only 14 percent for the past year, but is at only half its September peak. It fell x percent on Friday after analysts at Goldman, Sachs Co. and J.P. Morgan Chase Co. reduced earnings estimates for the company.