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

To: THE FOX who wrote (13613)	7/24/2003 9:08:55 PM
From: Kevin Rose	Read Replies (1) \| Respond to of 14638

Hi Bob: Well, I think there are many ways to look at the results, in my mind. The first reaction I had was disappointment that they were not able to continue making even a small profit. There revenues were short (I think by $70m, which is not that much). I believe the expectations had been building that NT would make another small profit, and slightly exceed revenue estimates. My second reaction is more positive. Looking at the bigger picture, what was the key metric a year ago? Cash. I believe that they have successfully made that almost a non-issue, with great cost control and cash management. Dunn was advertised as a bean counter who would closely manage the cash and expenses, and he seems to have done a good job. Another indication is gross margins (43.7%) - up slightly over last quarter (42.9%) and significantly over a year ago (34.5%). This indicates both strong expense management and a resistance to dropping prices too much. They can survive a lot longer, even with their iffy asset to debt ratio, with these margins. R&D spending fell slightly, but is still relatively high, which I believe is the right strategy (being an engineer :) Once the malaise lifts, it will be a dash out of the gate, and NT seems to be the best one positioned between the large and small vendors (large enough to keep spending significant money, small enough (now) to survive the revenue meltdown). Meanwhile, LU's margins dropped again (to 29% from 32% the prior quarter). LU is obviously having a tougher time, falling below the $2b/q mark while still at a $2.4b/q 'profit point'. They'll have to cut more, and write off more, which could be a death spiral as the long slow recovery starts to emerge. Short term, NT will probably drop on reduced expectations, then rebound. However, sometimes what happens is that people are looking for a 'long term' horse to ride, and keep waiting for that drop, and it doesn't happen. However, we'll clearly need better results to punch throw $3US and stay there. So, a small step in a long climb back up the hill. Good progress, but nothing to bet the house on... All in my own opinion. Be interested in hearing yours, and others on the board. NT is still a very high risk stock in a very depressed market, so caveat emptor. Good luck.