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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (74898)	4/13/2001 9:25:05 PM
From: American Spirit	Read Replies (2) \| Respond to of 99985

LU is trading at roughly one years revenues now. Their revenues just dipped but 25 bill market cap 20 or so bill revenue per year. And the VZ deal should help off-set the write-off of some bad debts. Now I know revenues ain't profit but those who say LU is on the verge of bankrupcy are just so full of it. Will never happen. They have a nice load of cash on hand as well. CSCO is still trading at a much higher multiple, and for good reasons. But assuming you believe a economic recovery will happen SOMETIME in the next year, isn't LU a great cheapie? I see no risk buying LU down here so long as you have an investment horizon beyond this summer. I'd prefer to buy on dips of course and I might. If it dips below 7 again I'm very likely on it. But I can't buy everything. I'd like a lot of tech stocks on any sharp dip. LU's problems are real but remember they are also temporary. and the bad news has been out there for many months so if it ain't priced in now when would it be? Looking past all the recent attacks and negativity a strong case could be made for LU to have very little downside from here. Buying it around here and averaging down if it dips should eventually give you a stellar gain. Maybe even more than buying CSCO in the mid teens. But both are great medium-longer term buys certainly. Personally I prefer EMC at 30 or lower to both of these, and prefer the safer Baby Bells and WCOM's at their tiny PE's to all of them. But remember catching a dog before it starts back up is the way to make the biggest gain. Look at poor LOR at 1.15 ten days ago and now at 1.86. Super-duper trade and probably going higher now, maybe even being bought out for 2-3 tims this price (speculating). So buy when there's still some blood in the streets but also some light at the end of the tunnel. LU from 70 down to 7 as an example doesn't seem to leave much downside risk. Not many will bother selling down here. Those who wanted out are probably gone already. And if ther is any whiff of good news it could hit $10 again in a jiffy. I know some disagree but frankly I am hoping we get trading rallies and sell-offs going forward as I can make more trading several times than just holding. I'd trade LU between 7 and 10, CSCO between 15 and 22 and EMC between 29 and 38 if I were to pick those. That's my general take. And if we get an extra rate cut so much the better. Might even rise those targets. PS - When it was at 17 six weeks ago LU was bumped to 21 on some takeover rumors by NOK. Could it happen again at 7? if so where could it go? Just speculating. PSS - Softechie was long LU at 17 as I remember, LU and WCOM (which by the way has a nice strong base in the very high teens down from $60 and is about to push through into the low 20's, and also a takeover play)

To: Haim R. Branisteanu who wrote (74898)	4/14/2001 2:32:01 AM
From: Bruce Brown	Read Replies (2) \| Respond to of 99985

Haim wrote: AS, any credible analysis why CSCO can not trade in single digits like LU ? after all similar business environment. Yes, the business environment is what it is. However, one could look at the balance sheets for the two to hypothesize about some things. That doesn't mean Cisco the 'stock' couldn't trade wherever it trades just as Lucent the 'stock' has, but what about Cisco the 'company' when compared to Lucent the 'company'? I'm not trying to 'defend' Cisco, but certainly wouldn't lop it in the same balance sheet pile as Lucent. I would just interject here that Cisco has no debt. $0 debt. (Ditto for Microsoft and JDS Uniphase has 42X more cash than debt.) Cisco also has $4.7 Billion in cash and short term instruments on the balance sheet. Yes, this is down from previous quarters if we take a look: Q2 2000 $3,999 Q3 2000 $4,849 Q4 2000 $5,525 Q1 2001 $6,391 Q2 2001 $4,782 Cisco doesn't need that cash to fund its working capital needs. Rather, it provides a cushion in a softening economy. Remember - they have no debt. Lucent has cash, yes. Cash and short term instruments total $3.8 Billion. However, Lucent has debt. Long term debt alone on the last balance sheet nearly equals their cash pile and weighs in $3.1 Billion. Lucent has 5 quarters of flat to declining revenue. Lucent has 4 quarters of EPS that look like this: December 2000 = $.34 March 2000 = $.18 June 2000 = $.00 September 2000 = (-$.02) December 2001 = (-$.47) If you look at the balance sheet performance of Lucent since its history as a public company, it has not been good - ever. At least when compared to Cisco. Does that mean that Cisco is suddenly going to mismanage the balance sheet and an economic softening going to derail them to the point that they become another Lucent? Who knows, but judging from the financial position on the balance sheet as it stands today, I don't think we can compare the two. That doesn't mean sentiment for the direction of the stock won't take it to single digits, but I just wanted to point the cash/debt scenarios out at both companies. BB