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Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: Anonymous who wrote (20304)	6/20/2002 1:56:28 PM
From: DiB	Respond to of 21876

Seeing some light in Lucent Mitchell Martin IHT Thursday, June 20, 2002 iht.com In the 1960s, people used to blame sunspots when things went wrong, starting with electronic devices but then widening out to lots of other things. In modern financial markets, hedge funds have taken on that role, sometimes with more justification. . The downsizing of the financial industry has sent a lot of former traders and analysts out on their own. Many have formed hedge funds, lightly regulated investment pools that can follow any of a number of strategies. . These strategies do not usually provide the same results as investing in stocks, and a low correlation with major world bourses is attractive to investors after the equity declines of the past two years. So there are a lot of hedge funds these days. . According to Ross Margolies, head of hedge funds and specialty products at Citigroup Asset Management, some of the hedge-fund activity may have created an opportunity in the beleaguered shares of Lucent Technologies Inc. The telecommunications equipment maker has cost its stockholders more than three-quarters of their investment over the past five years. . Lucent was hit hard by the meltdown of the telecommunications industry. Many companies that were offering broadband communications have either failed or drastically curtailed spending on equipment. . Last week, Lucent gave its shareholders the company's 58 percent stake in Agere Systems Inc., which makes circuits and other components for communications and computer equipment. Because of the spin-off, Margolies said, hedge funds that followed convertible-arbitrage strategies had to increase their short positions in Lucent stock, putting pressure on the price. . Convertible arbitrage funds buy convertible bonds and preferred stock and then sell the underlying common shares short. That way, they get the interest on the bonds but do not suffer if the stock price drops. . When Lucent spun off Agere, it had to increase the number of shares that holders of its convertibles would obtain if they swapped their securities for the stock. This compensated the bondholders for the loss of Agere, which made Lucent a smaller company. . The amount of the increase was calculated over a 10-day period that ended Friday, putting extra pressure on Lucent's stock as the hedge funds increased their short positions, according to Margolies. In the case of Lucent's 7.75 percent preferred stock, which Margolies said he held in portfolios that he managed, the number of shares was increased to 206.6 from 163.9. A second preferred stock issue saw its conversion rate changed to 168.4 from 133.7 shares. . The excess selling pressure ended last week, and Lucent rose 12 cents Monday, to $2.85. It then fell 13 cents Tuesday amid fresh concerns about technology in general. . But Margolies said the stock now would move higher. For one thing, he thinks Lucent will survive the telecommunications disaster, with few competitors left to provide equipment in the next upturn. For another, Lucent is net cash positive, he said. . Lucent had $4.8 billion of cash on had March 31, 50 percent more than its $3.2 billion of long-term debt, putting it in good financial shape, relative to many other casualties of the market bubble. . - Mitchell Martin (IHT)