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To: Nancy who wrote (15203)	2/1/1998 2:35:00 PM
From: Johnny Canuck	Respond to of 68048

Nancy, I haven forgotten you, NT and LU are very diversified companies with quite a few product lines, this is taking longer than I thought. I am just organizing my NT conference call notes this afternoon. Harry

To: Nancy who wrote (15203)	2/9/1998 4:18:00 AM
From: Johnny Canuck	Read Replies (3) \| Respond to of 68048

Nancy, I have not forgotten about the NT-LU comparison. I had a hard drive crash this week so I lost most of my notes, so I need to start again. I am a little short on time the next little while so I won't be able to get a detailed response to you for the next few weeks. I started a detailed comparsion across their common product lines before the hard drive crash. In more general terms they are both good companies that compete head to head in Public Carrier Networks, Wireless Infrastructure and Broadband Networks.. I have asked someone I know at NT to comment. As I said NT and LU are big diversified companies with a lot of divisions, so he will problably only feel comfortable commenting on his area of expertise. In the mean time this is what I can remember and re-construct from the notes that survived the hard drive crash. NT produces microelectronics only for its own consumption while LU has actively tried to market its products to OEM's so there is not really a comparison there. They are both very agressive in developing new technology and have large active research divisions. LU has 80 pervcent of its business in the United States. I not sure how accurate this number is as LU does not break out sales by geographic regions. 15 percent of its business comes form AT & T though. NT has only 54 percent of its business in the United States. NT has had more experience selling in to foreign markets than LU. The problem with dealing with foreign markets is the marketing and sales expenses tend to be higher. Collection of receivables tend to take longer too. This is reflected in the gross margins: NT: 42.5 percent and LU: 48 percent. The gross margin numbers reflect product mix issues too so it hard to tell how much of a real impact the foreign business has on NT. The real value in LU is its patents received from the old AT&T Bell Laboratories. A quick search reveals that they have 4649 patents referenced to Bell Laboratoies. The patents cover a broad number of areas including micro-electronics, network security, wireless infrastructure, and public telelphone networks. NT and its old research division Bell Northern Research on the other hand only has about 80 that I can find. The value of the patents is that the more critical ones can provide a barrier to entry to certain segments of the markets for LU 's competitors. They also receive royalties from companies who want to license their technology. There is no way to know how much LU makes off its patents as they do not break out these numbers. Their list of patents are impressive though. Research and Development expenses are essentially the same for both companies coming in at 12.9 percent fro NT and 14.4 for LU. SG and A expenses are about the same for both companies at 16.4 percent for NT and 17.8 for LU. This is using this quarters earnings report. Revenue growth appears to be in the low to middle double digits. Income growth is coming in at 22 percent for NT and 30 percent for LU. Long term earnings rates for both companies are for 25 percent per year. For the most part both company's are in approximately the same financial shape and the essentially the same busines model. The comment I will make about one of their specific business units at this time is the NT seems to hold the lead over LU in entering the enterprise network and public carrier WAN business. They are aggressively going after the convergence model for networking and telecommunications. Harry