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

To: Cooters who wrote (13845)	5/3/2004 4:09:56 PM
From: Eric L	Read Replies (2) \| Respond to of 14638

Nortel and UMTS Cooters, << Looking back over Nortel's UMTS contract wins, which are very impressive IMO, it seems little or no revenue from these networks has yet been recognized. I gather this both from the actual numbers and from Nortel's comments. I know new networks have different rules for revenue recognition, but I find barely a reference to this area, no deferred means of accounting for them. >> While Nortel ranks behind Ericsson, Nokia, and Siemens/NEC, they are doing well, possibly even ahead of Alcatel, while Lucent and Motorola have fared very poorly on the UMTS side of the ledger. Especially compared to Lucent, Nortel has always had more balance on the GSM side of their business. I haven't looked at Nortel's filings which is where they probably comment on how they recognize infra revenue. I have looked at the 20-F's for Nokia and Ericsson and while they approach revenue recognition differently from one another essentially infra revenue is booked on a project basis. It's certainly not like handsets where you ship and bill (or you alternatively ship and bill when inventory is drawn from stock). You pretty much recognize infra revenue when its brought live and accepted. New generation equipment is accepted under more stringent guidelines and milestones than current generation so there could be more lag (and a windfall quarter or two). Nokia caught this windfall a year or so ago. Then they get caught in the flip side when YoY numbers are compared to the year ago quarter where they 1st recognized the delayed revenue. Ericsson for some reason recognized a little earlier and more steadily. Typically the question comes up in earnings CC's. << Is Nortel a similar situation to QCOM today, in the sense QCOM is being valued on a growing CDMA2000 market while a much larger WCDMA market has yet to be priced in? >> I'm not sure about that. I would think that it is somewhat priced in already. That said, Ericsson and Nokia are being very cautious on forecasting much of an increase in the UMTS infra spend. There might be better visibility on this in September or October, after carriers are back from vacation and they assess where they are at with their expanded launch plans, but right now visibility is not good, and there is no clear indication that carriers are ready to open up the purse strings. This is one of the reasons sector sentiment has cooled a bit after the optimism generated in Cannes, Hannover, and Atlanta, in February and March. Best, - Eric -