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Strategies & Market Trends : Z Best Place to Talk Stocks -- Ignore unavailable to you. Want to Upgrade?

To: hui zhou who wrote (39364)	5/5/2002 4:15:14 PM
From: DanZ	Read Replies (1) \| Respond to of 53068

The telecommunications sector is huge, and the players are beginning to provide hardware, software, and services that span across traditional areas. Some people might even put Internet service providers in the telecom sector. Traditional long distance companies provide local service, traditional local service companies provide long distance, and upstart companies provide local, long distance, cellular, and Internet service all under one umbrella. Other companies such as Lucent, Nortel, Ciena, Ericsson and Nokia provide infrastructure. The latter two also sell cellular telephones. Qualcomm makes chip sets that are installed in nearly every cellular telephone that employs CDMA technology. If a Qualcomm chip isn't in the phone, whoever made it pays a licensing fee to Qualcomm. Then there are companies such as Intervoice, Speechworks, and Nuance that provide software and hardware systems that interface with telecommunications equipment. Do you consider them telecom or IT? It is clearly blurred. Oracle isn't a telecommunications company, but they sell software that end users use for accessing data over telecommunications networks. They aren't a telecom company, but their business should increase when business at their telecom customers increases. My point here is that you don't have to buy stock in a pure telecom company to make money when the telecom industry recovers. To be honest with you, I haven't studied the sector enough to tell you which companies I would buy. However, in general I would prefer companies that have a competitive advantage, low debt, a lot of cash, and don't sell commodity products. A company such as NT is not attractive to me because they have a huge debt load. I don't think they will be able to grow as fast as a company that has low debt and a lot of cash. The latter will have lower interest payments as interest rates rise during the recovery and should be more free to make acquisitions to grow sales and earnings. I don't like companies such as Sprint or AT&T because they don't have a competitive advantage. In my opinion, they sell commodity products, and can't differentiate themselves on their strong brand names anymore. People aren't willing to pay AT&T, MCI, or Sprint more to make a long distance call just because their names are AT&T, MCI, or Sprint. These companies have responded by lowering their rates, which hurts their margins, which in turn hurts their growth rate. They have to make up for the difference by increasing their volume. Ditto for the cellular service providers such as PCS, AT&T Wireless, Nextel, etc. I'm sure that their stock prices will increase during the recovery, but I don't think they will increase as fast as companies who have a competitive advantage and don't sell commodity products. Anyway, these are just some general thoughts. If you suggest a few companies we can discuss them.