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

To: David Hansen who wrote (12152)	12/27/2001 6:56:34 PM
From: Kevin Rose	Respond to of 14638

Thanks, David and T-guy. I believe there are two basic scenerios: we have seen the bottom, or we haven't (brilliant, eh?) In the first, we've seen the bottom in tech drop-off, IT spending, and overall industry sentiment. If so, we've seen a corresponding bottom in telecom spending, given that sentiment in the 4th quarter was horrible (around Oct, most CIOs and IT managers were absolutely scared poopless). Given that, I could guess at a NT '02 quarterly rev of $3.5, $3.8, $4.0, $4.2 = ~$15.5b. Assuming Dunn has cut enough cost for a, say, $3.6 break-even, that's a $1b pre tax/writeoff net. Even at $3.8b, that's still about $.10/share. I think these are conservative; with all the stimulus, upside is possible. Second scenerio is that the bottom is yet to be seen. 4th quarter is worse than expected, and 1st quarter is abysmal. Political situation worsens; more attacks of some kind, possible Pak/Ind war, etc. NT needs to further cut, down to a base of <$3b/q and ~$12b/y. More writeoffs and layoffs at NT and everywhere else. Of course, there is a third scenerio: another Sept 11th, Pak/Ind nuke war, smallpox, etc. In that scenerio, our portfolios won't matter; only survival will. Maybe I'm an optimist, but the first seems more likely than the second or third. We teetered on the edge in Oct, but I believe the political situation has improved dramatically, and with it business confidence. I'm feeling that the biggest danger to NT is not the second scenerio and a death spiral to telecom in general, as much as a self-inflicted wound. Dunn is as yet unproven, and Roth has shown us how badly an incompetent CEO can hurt a company. I believe that it IF NT gets beaten down to that $10b rev/year mark, it will be management missteps and loss of market share more than overall market erosion. My red flags for the future will NT market share/mind share/competition. Well, it will be interesting. I've got bets on NT, JDSU, and CSCO, as well as long-shot optical bets (GLW, etc). I still think the big loser will be LU, but we'll just have to wait.