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

To: Rainy_Day_Woman who wrote (5357)	1/5/1999 9:55:00 AM
From: Techwatch	Read Replies (1) \| Respond to of 21876

TO All: WDR on LU and ASND relationship WARBURG DILLON READ "Wall Street Tech" is the email newsletter on Telecom Equipment, Data Networking and Telecom Software from Warburg Dillon Read LLC (WDR). For comments or to unsubscribe to the list, contact Bill Michels. Nikos Theodosopoulos 212.821.6951 nikos.theodosopoulos@wdr.com Jeff Schlesinger 212.821.4715 jeffrey.schlesinger@wdr.com Scott Heritage 212.821.6828 scott.heritage@wdr.com Mike Agarwala 212.821.3192 michael.agarwala@wdr.com Scott Searle 212.821.3468 scott.searle@wdr.com Anton Wahlman 212.821.3675 anton.wahlman@wdr.com Joseph Wolf 212.821.5150 joseph.wolf@wdr.com Bill Michels 212.821.2207 william.michels@wdr.com ______________________________________________________________________ Our research suggests that the relationship between Lucent (LU-Buy-114) and Ascend has improved over the past two months. As mentioned in past notes, Lucent began a new agreement with Ascend a few months ago and is marketing Ascend ATM switches. In addition, we believe that Lucent's internal developments for ATM switching equipment continue to face delays, which make product overlap issues less meaningful in the near to intermediate term. Finally, we estimate Lucent's stock appreciation now makes a combination with Ascend neutral to earnings even with a 25%+ premium to Ascend's stock at yesterday's prices. Thus, we are increasing our probability of such a combination to over 50% from under 50%. We emphasise, however, that we are not aware of any imminent deal and that anything could happen here. Highlights: Our research suggests that a combination between Ascend and Lucent is more likely to happen than less likely. This is a change from our prior view. We believe the probability is higher for the following reasons. 1) Lucent began a new marketing relationship with Ascend a few months ago whereby Lucent is selling Ascend ATM switches. We believe that both companies have benefited from this relationship with increased sales. 2) In addition to this new relationship, some of Lucent's largest customers like Bell Atlantic that use Lucent as a systems integrator have asked Lucent to utilise the Ascend ATM switching platform. 3) Ascend has not been as successful overseas in WAN switching. Lucent would probably increase sales for Ascend overseas as has already been witnessed by one win in KPN in the Netherlands as part of of the existing agreement with Ascend. 4) Lucent has already discontinued its core ATM Globeview-2000 switch which eliminates a direct overlap with the Ascend 550 switch. The internal switch being developed by Lucent is not likely to hit the market until 2000. 5) While Lucent has not discontinued its edge MX-1000 ATM switch, the first couple of releases of this product scheduled for 1H99 will not be fully featured. In addition, we believe certain features have been delayed on this switch. 6) While there is still an overlap between the PM4 remote access concentrator from Lucent and the Ascend TNT, there is not much customer overlap between Lucent and Ascend in the remote access concentrator market. 7) Perhaps most significantly, Lucent's P/E is now the highest it has ever been since the company is public. Also, Lucent's PE is trading at a 27% premium to Ascend's PE which is at the high end of the historical range since Lucent was able to use pooling accounting. 8) We emphasise that we are not aware of any imminent deal. We just believe recent developments between the companies, their respective customers and relative valuations suggest that a combination is more likely than less likely. At current prices, we estimate Lucent could acquire Ascend at around $85/share with no or little dilution in 1999 without any synergy assumptions.

To: Rainy_Day_Woman who wrote (5357)	1/5/1999 11:39:00 AM
From: X Y Zebra	Read Replies (1) \| Respond to of 21876

Morning Fox. In 1998, Conexant posted $1.2 billion in revenues, 55 percent of which came from PC modem sales. The company sees more than 60 percent of its 1999 revenues coming from its new network and wireless businesses. Decker, previously president of Rockwell Semiconductor Systems, sees that figure rising to about 75 percent in 2001. and... The company said it was spending three times more on research and development for its network and wireless division than for its personal computer division. Conexant expects revenues growth of between 25 and 30 percent per year if market conditions continue to be favorable toward its new products. Conexant holds largest share of the PC modem market, its nearest competitor being Lucent Technologies Inc. I would say that the competitiveness that drives Lucent and the prospects of potentially a larger share of that business, (albeit at reduced prices as per the article itself), continues to justify an investment in Lucent. I remember seeing a pie graph of the sales breakdown from Lucent, (in their web site), the most striking element was that only 25% of their sales were from abroad. I would like to see a similar graph in terms of the different markets that Lucent is in, and then each market's prospect going forward including Lucent's specific position as market leader or main competitor. Overall a better investment than the Internuts. A solid company, expanding markets, reduced risk exposure. imo. Thanks for the news.