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

To: James Chan who wrote (236)	10/25/1997 12:35:00 PM
From: Johnny Canuck	Respond to of 14638

Conference call notes: Nortel Conference call notes: Present: Bob Kay - Investor Relations Wes Scott-CFO Ian Craig-President Broadband Networks Financials: The result are unaudited: Revenues for 3Q97 3.5 billion up 15% over 3Q96 For nine months 10.46 billion up 23% over 9 months 96 3Q97 Income 153 million or 59 cents per share up 37% from 3Q96 112 million or 43 cents per share 9 month iincome 426 million or $1.63 vs 302 million or $1.17 Numbers include a one time gain of 35 cents per share from sale of Nortel Distribution division and TTS Meridian division and resulting 32 cents per share charge. Order input 3.54 billion for 3Q97 vs 3.09 billion 3Q96 Year to date 9 month order input 10.5 billion up 22 percent from last year. Revenues reflect strength in: -public carrier network sales in North America -Wireless sales in Europe, Asia, and the Carribean/Latin America -Broadband networks in all geographic areas. In general strong overall demand in wireless and boradband products. Wireless sales up 252 million to 750 million. This is up 50% over 3Q96 with strength in all areas including GSM, TDMA, CDMA. Broadband Network sales up 28% to 787 million with most of growth in the United States. Strong demand for high carrier transport products such as OC48, OC192 and acces nodes. 9 percent growth in public carrier network(PCN) business . This was offeset by decline in business in Asia. Growth in North America due to increase demand for bandwidth on the carrier networks due to 2 nd telephone lines and trunk line growth. Also strong sales in software products. Enterprise networks: 4% year over year growth for Q. Gains in Magellan Beta sales and PBX products. Decline in wireline terminal business. Data carrier business had 16% growth to 190 million. Multimedia products grew 29% to 524 million. Decline in DPN X25 legacy business. For revenue, North American sales were up 14% in all businesses with strong growth in broadband products. Europe 15% growth due to wireless sales. Asia Paciic and Caribean/Latin Americasales up 17% due to wireless with declines in PCN sales. Canadian sales up in all areas. Revenes up 19% over 3Q96 and 26% over 9 months 96. Gross margins 41.6% up from 38.6 % 3Q96 due to strong software sales in broadband products and PCN sales, positive product mix, and cost reduction in wireless products. SGA was 659 million or 18% of sales up from 3Q96 numbers of 526 million or 17.2 % of sales. 9 month gross margin 1.92 billion or 18.96%. SGA and reflect investment in computer infrastruture for a supply chain management system, Y2K compliance of systems and reserves fro customer financing. R and D expenses were 528 million or 15.7% of sales. vs 439 million or 14.4% of sales 3Q96. R and D expenses 1.5 billion or 14.9% for 9 months of 97. New products for 3Q: -Passport 4400 -1 megabyte modem -Nortel/Norwest power line modem technology in Europe -wireless network management applications for intelligent networks Inestments: 31 million vs 18 million for 3Q96. Increase was due to higher equity earnings. No foreign exchange loss as in 2Q97. Cash 876 million up from 669 million in 3Q86. News: - 3 wireless contracts in Brazil worth 700 million -150 million PCN contract in Taiwan -64 million wireless contract in Boliva -They won 40% of Sprint D and E block wireless buildout, worth 300 million to NT -They won a wireless contract in Germany with Dalmer-Benz as partner. This is a new market for NT. Market is highly controlled by local vendors due to politics. This is a result of Germany deregulation of TELCO industry. -Vertical Systems Group rates Nortel number 1 in ATM LAN and Frame Relay LAN in market share by sales. Summary of Earnings: 15% revenue growth 3Q97 to 3Q96 10.7 billion order intake up 22% with a book to bill of 1.01 7.3% operating margin vs 6.5% 3Q96 Income 59 cents up 39% from 3Q96. Notes from Questions: -4Q is traditional very strong for NT. -NT sees slower PCN growth in 4Qdue to RBOC having spend their budgets earlier this year in 2Q and 3Q versus traditional spending patterns -Wireless income growth in 4Q may be less due to higher shipping volumes of CDMA ( margins are lower for this product I think due to royalty to QCOM). -No currency exposure in Asia in 4Q (all US currency contract perhaps) -revenues growth year over year should continue to be the high teen's for 98. -revenues will be impacted 4 to 5 percent due to sale of distribution division. -Gross margins will be affected by product mix.NT expects higher software sales for PCN/Broadband (lower margin products) products, lower enterprise terminal sales (good since they are a low margin product), higher wireless sales(lower margin products). - expect margins to be 40% going forward. -98 revenue growth mid-teens SGA 16 to 18% of sales R and D expenses 12 to 15 % of sales Return on Assets 18 to 22 % of sales -BTB in previous quarters was less than 1. -current BTB of 1.01 does not include all of Brazil B-band sales(720 million contract) only 25% has been booked this Q. Sprint contract no P.O. yet. -4Q BTB will support revenue forecast(I have no idea what this means) -Broadband sales should continue to grow 20% -Alternate carrier, new carrier and existing carrier growth is due to bandwidth demand. -They have shipped 1000 of the OC 192 10 gigabit product. -They do not see any decline for orders for this product. -Anticipate international release/sales in fiscal 98 especially Asia. -They are the number 1 supplier to alterante carriers. -No impact from SDH(?) network sales till late fiscal 98 early fiscal 99. -high interest in power line modem product just announced in Europe -still strong sales in UK. -Not currently a big maket presence in Europe. Politics make it difficult to break in to markets. -OC2 192 revenues-shipped 1000 units this years, expect volume shipments next fiscal year. -existing OC192 cusotmers MCI, WCOM, Williams Network(?), Touch 92. -WDM amplifiers have 4 channels currently, expect 16 channels 10 gigabit by next year last 98 ,early 99 -no slack in demand in this market segment (WDM) -70% wireless market share in Columbia -see wireless growth in Brazil from existing customers -Possible growth in Ecuador(SP?) amd Gwatemala(SP?) for wireless -possible growth for fixed wireless systems in Mexico due to 4Q spectrum auction in the country -possible growth due to Carribean and Latin America A and B band auctions -expect 45% compound year or year growth in wireless till year 2000, industry projections -Passport, multimedia nad Broadband ATM growth at levels of sectors or faster. Expect double digit growth. -No comment on issue of whether there were going to be greater margins for A and B build out versus D and E build out. Suggestion that A and B will be more than D and E by analyst. -Expect to recognize revenue from Brazil shipments in 4Q -Germany contract win will not have significant revenue recognition till 1Q98 -Enterprise network sales grew 4%t this Q, 9% YTD. -Terminal business down -PBX double dight growth achieved, market share intact but not growing -some currency effect due to sales in France -PBX, Norstar, Magellan sales still growing -going forward 5 to 10% growth possible, a wide range was given on purpose, management uneasy about growth numbers -PCN 4Q will be flat due to increase in software sales -PCN growth mid to high single digit growth 98,99 -16 channel WDM product next year -will go from OC192 to OC786 , will skip OC384 -idea of 100's of channels on WDM not practical, see many limited channel installation instead -See growth in Europe in PCN, broadband and Cable TV -growth in cable TV for Japan too -NT has low market share in China in wireless, looking for PCN and enterprise wins. -Asia Pacific saw declines in revenues due to reluctance for services provider to invest in infrastructure. Currency risk may reduce investment in region and carrier competition will forces bankruptcies. Carriers are waiting to see demand and level of competition. -possible investment in wireless infrastructure since it is modular, can be build out gradually -This region is a small percentage of revenues -no currency exposure in Asia next Q -NT has won some ATM WAN contracts that they have not announced for their Vector and Concorde lines -AT&T and GTE are noticing subscriber growth slow according to analyst, NT is not noticing an impact on sales as yet. -

To: James Chan who wrote (236)	10/25/1997 12:38:00 PM
From: Johnny Canuck	Respond to of 14638

It looks like growth in their wireless sector may be slowing. techstocks.com

To: James Chan who wrote (236)	10/26/1997 4:06:00 PM
From: Winston A. Chin	Read Replies (1) \| Respond to of 14638

Hi James, I thought $95 was a strong support level but it seems to be testing the $90 level. I am planning to start accumulating at the $92 level as I think the PaineWebber target of $130 by the end of 1998 is achievable. Personally I am not too surprised by the clobbering as the PaineWebber target for the end of 1997 was $95.The recent run up to $113 was probably caused by the article in Investor's Business Daily (Tuesday Oct 7,1997 Pg A6) WAC