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Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: pat mudge who wrote (4856)	10/29/1998 7:28:00 PM
From: Mr.Fun	Read Replies (3) \| Respond to of 21876

Pat, While our fund has done very well with Ascend (In since february at $24) and has gotten burned with NN (rode it down from $47 to $30 last fall - winter) we try not to have favorites, and I would love to jump in to NN. We are a little gun shy and will wait until Mr. Lutz shows more concrete progress against his cost improvement goals. Nevertheless, Tam Dell'oro has a spotless reputation for digging deep with impartiality. Our experience has been terrific - I never find obvious errors in her data, as I have with IDC, DataQuest and others. In time, earnings will show which source to be more accurate, I have my bias, you have yours. As for whether it's more significant to get contracts renewed than to win new contracts, the MO of this industry is that most of the time incumbents win follow-on contracts - even when they are percieved as lagging behind on technology (e.g. Cisco frame relay at T). Ascend has also been taking care of business in installed base - BellAtlantic (including out of territory), BellSouth, GTE, WorldCom. NN has done almost as good a job, but lost Frontier, LCI and USWest. The ATM/frame relay market will grow ~30% next year. The question will be who will increase market share, who will decrease or stay the same. With the new contract wins combined with maintaining business with an impressive list of incumbent customers, Ascend is positioned to gain significant market share. Even Vertical Systems Group shows that Ascend has gained more market share than anyone else between 97 and 98. Given that the contracts they signed deploy over 12-18 months with significant add-on business virtually assured over the next 4-5 years, the momentum of Ascend's market share improvement will persist. I believe NN will have fairly stable market share over the same period based on its book of contracts won - this still means its business will grow ~30% with likely improvements in cost structure. As to whether these customers are large or fast growing I would say both. Ascend has a mix of smaller, fast growing customers (Qwest, L3, Williams, Frontier) and big, established incumbents (BellAtlantic, Bell South, GTE, MCI/WorldCom, AT&T, NTT). Given that North America sales of ATM continues to outgrow Europe, Asia and ROW, right now I would much rather have Ascend's customer base than NN's ( and NN's over anyone else BTW) I stick with my contention that Ascend is #1 and NN #2, also not based just on market share but on strength of products and total management systems. I have talked to most of the North American customers for both these excellent companies. While as you say, NN customers are pleased - many Ascend customers are absolutely ecstatic. Talk to Williams or Frontier. Try to find a core network engineer at T. Terry Matthews likes to talk big about how there is no competition with NN network managment, but that is not the way customers feel about it. I asked the customers - NN had a big advantage 2 years ago, the customer perception is that Ascend's NavisCore has bridged the gap. As for DWDM, I'm sorry I misunderstood your previous comment. NN has announced it will integrate Cambrian gear, but the biggest part of the value-add is to eliminate expensive SONET equipment. Whether the DWDM circuitry is on shelves inside the ATM cabinet or in a separate box is probably not a deal maker, but a nice feature everything else being equal. Ascend is explicitly not making its own DWDM to integrate into the cabinet, but is way out in front of everyone else in delivering the capability of interfacing directly with the most popular DWDM equipment, thus eliminating the need for Sonet gear. Given that most fiber systems will be asked to carry more than just ATM data - (Pure IP, traditional circuit switched) - for years, particularly in the rboc space, many customers may prefer that this capability not be fully integrated into the ATM box. I believe the approach Ascend and Cisco are taking, of building in direct interfaces to a wide variety of DWDM gear is the preferable approach. Let me close by saying again that I see NN as having alot of upside potential. You have evidently spent alot of time with company management and done alot of homework. I caution you that NN has a terrible reputation on Wall Street for promising alot and delivering very little. Mr. Lutz is a step in the right direction, but he has a big job. I think you are a quarter or two away from seeing a big move in this stock, but I could be wrong. Best of luck, and for your sake, I hope I am wrong about NN.