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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: gbh who wrote (56308)	10/21/1998 12:14:00 PM
From: Mark Duper	Respond to of 61433

lol, this way the only money he loses is the vig!

To: gbh who wrote (56308)	10/21/1998 12:17:00 PM
From: Mighty Mizzou	Read Replies (3) \| Respond to of 61433

Puts against my shares. Calls are way too pricey. Will look at calls IF we get into 30's for sure.

To: gbh who wrote (56308)	10/21/1998 12:36:00 PM
From: gbh	Respond to of 61433

ASND and LU mentioned, and telco spending too. Top Stories: Looking for Lucent to Shine By Kevin Petrie Staff Reporter 10/21/98 11:50 AM ET Tomorrow, Wall Street hopes to affirm that Lucent (LU:NYSE) hasn't caught the sluggish bug. Lucent, which will report fiscal fourth-quarter earnings tomorrow morning, ranks as one of the most popular network suppliers on Wall Street. As the child of AT&T (T:NYSE), it has long built circuit switches for large phone companies, a business that has weakened slightly for certain competitors thanks to economic troubles and a shift in network architecture: Carriers are investing in the Internet in the hope that one day they'll ship phone calls over it. As a result, Lucent's old circuit-switch revenue will thin, although nobody knows how much or when. To adapt, Lucent is snapping up small Internet suppliers in order to compete with the likes of Cisco (CSCO:Nasdaq), the dominant networker. Meanwhile, isolated evidence of a phone-gear slowdown has surfaced. Northern Telecom (NT:NYSE) and Alcatel (ALA:NYSE ADR) have warned that growth has slowed slightly. Lucent has stuck to its bullish guidance, however, which likely has helped drive a 31% rise in the stock since Oct. 7, outpacing the gains in many of its tech rivals during the market rally. Lucent shares closed Tuesday at 74 13/16. Analysts surveyed by First Call expect Lucent to earn 39 cents per share for the quarter ended Sept. 30, up from 29 cents a year earlier. Investors will want reassurance that Lucent has shielded itself from what hit Nortel and Alcatel, and from global economic problems. "Lucent's business is sensitive to the telephone industry's budget for capital expenditures, which could be scaled back during an economic recession," says analyst Alex Cena with Salomon Smith Barney. Still, Cena is bullish; he rates the shares a buy with medium risk. Another risk is that Lucent pulled 24% of its revenue from international customers in fiscal 1997. (Solly has underwritten a Lucent offering.) "Frankly, I think capital spending for telco companies is a little more protected than other areas," says Philip Coburn, senior vice president of Lynch & Mayer, a New York firm invested in Lucent. He believes that Lucent's network systems unit, which brings in three-fifths of revenue, grew a robust 16% in the September quarter from a year earlier. As for the future, Coburn expects Lucent to gain market share and partially offset a global slowdown, achieving 14% annual growth in this unit. While lower than Lucent's historical growth in the unit, that figure still is above expectations of 10% at the time of the IPO in April 1996. The network systems division includes both conventional circuit switches and newly acquired packet-based data systems. Coburn also expects Lucent to expand profit margins by trimming costs and enjoying a lower tax rate. Cena with Salomon says Lucent might earn half its annual profits in the December quarter because carriers buy their equipment in such a "lumpy" fashion. Executives may say in the conference call tomorrow whether the company is on track. On the acquisition front, Lucent this month spent $50 million in cash in adding Quadritek, a private developer of Internet protocol, or IP, software, to its chain of small data companies. With the passing of Oct. 1, marking the two-year anniversary of its spinoff from AT&T, Lucent can enter pooling-of-interest transactions, in which it combines with companies without booking goodwill, the excess of the purchase price over the acquired company's net worth. Goodwill brings with it charges that in a large acquisition can make a dent in earnings. (Given its small size, the Quadritek acquisition is being accounted for as a purchase.) Pros pick Ascend (ASND:Nasdaq), an established builder of Internet gear for carriers, as the odds-on favorite as an acquisition target for Lucent. But it's unlikely that Lucent will make any such announcement tomorrow; indeed, on Tuesday Ascend CEO Mory Ejabat told CNBC he isn't in active talks with anyone. Lucent has declined to comment on the subject. Lucent stock was damaged by the market tumult this summer and fall. While still richly valued, at 74, Lucent now trades well below the low 100s it touched in July. Investors price its shares at 47 times profits in the last four quarters -- minus charges -- and 3.4 times sales. In a recent report, Cena predicts that by the end of next year, Lucent shares will jump back to around 100, or about 40 times next year's earnings estimates.